After dieselgate, Volkswagen goes electric

November 22, 2016
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Last year, Volkswagen sold 4.4 million of its own-brand passenger cars worldwide/AFP
Last year, Volkswagen sold 4.4 million of its own-brand passenger cars worldwide/FILE

, FRANKFURT AM MAIN, Germany, Nov 22 – Volkswagen on Tuesday said it wanted to be the world leader in electric cars by 2025 as the German car giant unveiled a major shift to clean-energy vehicles in the wake of the dieselgate emissions cheating scandal.

The US market, where the pollution crisis first erupted, will play a key role in the revamp, VW brand chief Herbert Diess said, announcing a “comeback story” for the region with plans for electric cars to be built in North America from 2021.

Overview
  • The shake-up at Volkswagen's core brand comes as the group tries to recover from the biggest crisis in its history after it admitted last year to installing emissions cheating software in some 11 million diesel vehicles worldwide.
  • The so-called defeat devices could detect when a vehicle was undergoing regulatory tests and lowered emissions accordingly to make the cars seem less polluting than they were.

“By 2025 we plan to sell one million electric cars per year, and by then we also want to be the global market leader in electromobility,” Diess said at a presentation of the brand’s future plans.

“Going forward our electric cars will be the hallmark of Volkswagen,” he told reporters at the VW group’s Wolfsburg headquarters in northern Germany.

Last year, Volkswagen sold 4.4 million of its own-brand passenger cars worldwide.

The company’s switch to electric will be made possible through new investments and economies of scale, Diess said, and is a crucial part of the troubled brand’s efforts to reinvent itself.

VW on Friday already announced the biggest revamp in its history, saying it would cut 30,000 jobs to save 3.7 billion euros ($3.9 billion) a year by 2020, while ramping up investment in future technologies such as electric cars, self-driving cars and digitalisation.

“Our industry will undergo more fundamental change over the next 10 years than ever before,” Diess said, predicting that “the breakthrough” of electric cars was just four or five years away and would be driven by environmental concerns.

“For most customers the electric car will soon be the better alternative,” he said.

‘Electrify America’

The shake-up at Volkswagen’s core brand comes as the group tries to recover from the biggest crisis in its history after it admitted last year to installing emissions cheating software in some 11 million diesel vehicles worldwide.

The so-called defeat devices could detect when a vehicle was undergoing regulatory tests and lowered emissions accordingly to make the cars seem less polluting than they were.

Most of the cars bore the Volkswagen logo but vehicles by other VW group companies such as Audi, Seat and Skoda were also affected.

The scandal hurt sales and damaged the reputation of the proud German company pushing the group to its first loss in over two decades last year.

But even before dieselgate, the VW brand had been struggling with profitability, weighed down by high costs and low productivity.

“The image of our brand has suffered from the diesel crisis, many people no longer trust us as they used to,” Diess said. “Our main task is to win back this trust.”

American customers were particularly turned off by the cheating scandal, dealing another blow to a brand that has never been very popular in the US something the carmaker is determined to change.

“In North America we want to write a comeback story,” Diess said, starting by focussing on core segments such as large SUVs and limousines.

Next, under the motto “Electrify America”, VW will begin the local production of its electric cars in the region in 2021, he added.

“Nowhere else can you make more money by selling cars than in the United States,” according to Diess.

But analyst Frank Schwope of Nord/LB bank said he was “sceptical” about VW’s ambitious plans for the US.

He said the VW group had already taken a big hit there over dieselgate, reaching a $14.7-billion settlement with US authorities last month that included compensation for nearly half a million owners of the affected vehicles, with more legal costs expected to follow.

“Even if for many Volkswagen executives the US is and has long been seen as a challenge, the country appears to be a bottomless pit for Volkswagen,” Schwope said.

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