Volkswagen has launched the “biggest electric offensive” in the company’s history as it accelerates its push to become the largest EV manufacturer in the world.
In a series of unprecedented moves for the company, including a multimillion-pound stake in a Chinese EV battery maker and a raft of new vehicles in 2021 with a high number of electric and hybrid models, Volkswagen has marked “the beginning of a new era” in its EV manufacture capability.
To kick off its foray into EV dominance, Volkswagen is poised to take a 20% stake (worth about £429m) in Chinese electric vehicle battery maker Guoxuan High-tech Co Ltd.
The move, which is due to be finalised in the next two weeks, would mark the carmaker’s first instance of direct ownership in a Chinese EV battery manufacturer.
This, as Volkswagen proposes to sell 1.5 million new energy vehicles (NEVs) in China every year by 2025.
What is a NEV?
A New Energy Vehicle (NEV) is a Chinese state term for plug-in EVs eligible for public funding, including battery electric vehicles (BEVs), plug-in hybrid EVs (PHEVs) and fuel cell EVs (FCEV).
Next is Volkswagen’s plan to deliver 34 new models into the worldwide automotive market in 2021, eight of which will be electric or hybrid vehicles.
The company has also vowed to invest more than £16bn in future technologies right through to 2024, with around £9bn in the further development of its e-mobility piece.
The carmaker has also pledged to halve its CO2 emissions by 2025 before becoming entirely carbon neutral by 2050. Volkswagen has also set an ambitious target of 22 million electric vehicles (EVs) by 2028 as part of that initiative.
These developments provide a roadmap that speak to a new vision for Volkswagen widely reported by various media outlets and seem to corroborate a rather ominous premonition of automotive trade war as the race to electrification heats up.
Protolabs Europe vice president and managing director, Bjoern Klaas, has predicted that at least one major European carmaker will fall in the next three years as automotive manufacturers fight to survive a period of “extreme change” in the industry.
One automotive news outlet said Volkswagen Group chief executive officer, Herbert Diess, had pronounced “the time of traditional car manufacturers is over” to a meeting of company managers – adding that the company must hasten its digital take up and vehicle manufacture following a recent surge in EV rival Tesla’s share price.
Volkswagen’s Leading EV Competitors
Tesla’s best-selling EVs are the Tesla Model S (Sedan) and Tesla Model X (SUV), and increasingly, the Tesla Model 3 (Sedan).
The Model S was, at the time of its first release, the highest rated EV ever tested by Consumer Reports, while the Model X boasts almost 300 miles drive range per charge.
The Nissan Leaf was the carmaker’s top selling EV in Europe in 2018, and in 2019 Nissan brought out the e+ Tekna which boasts more than 70 extra miles in drive range capability.
The Sunderland-manufactured Tekna features advanced Nissan Intelligent Mobility technology, delivering up to 239 miles of emission-free driving from a single charge.
All Leafs can store more than 10GWh of electricity combined and the e+ 62kWh lithium-ion battery offers 55% more capacity than previous iterations.
The car giant recently entered the EV market with the BMW i3, an all-electric SUV. In ‘Comfort mode’ the i3 drive range is between 80 to 100 miles, while the i3 REx delivers between 160 to 180 miles.
“VW would need to capture 53% of global BEV market share to sell 22 million EVs by 2028… something that would prove to be extremely challenging”
Chevrolet manufacturers the automotive section of General Motors, and Chevy’s first venture into the EV market was the Chevrolet Bolt, which boasts more than 220 miles per charge at a cost far below other long-range EVs, such as Tesla.
Ford’s leading EV to date is the Ford Focus Electric which is the electric version of the petrol/diesel models, offering more than 100 miles per charge in its battery.
Kia’s best-selling EV is the Kia Soul EV. The Soul EV looks and drives much like its non-electric twin, except with a 100-mile electric battery under the bonnet.
Speed bumps ahead
Volkswagen must also build more manufacturing plants and survive the automotive bureaucracy created by the US-China trade war if it wants to be the biggest EV manufacturer in the world – according to energy research consultancy Wood Mackenzie.
The firm still anticipates Volkswagen’s ascendance to world’s largest EV manufacturer by the end of the decade, but rowed back on the carmaker’s estimate of 22 million vehicles to 14 million by 2028 – still making it the most prolific contributor to EV manufacture.
In addition to ramping up its manufacturing footprint, Volkswagen will have to negotiate “aggressive Chinese policies” on EVs to get nearly half-way there, Wood Mackenzie added.
“According to Wood Mackenzie’s base case scenario, VW would need to capture 53% of global battery electric vehicles (BEV) market share to sell 22 million EVs by 2028. The company would also need to secure 57% of all EV battery pack production, something that would prove to be extremely challenging,” said Ram Chandrasekaran, Wood Mackenzie principal analyst.
VW views BEVs as the most effective means of CO2 reduction, according to Chandrasekaran, adding that Nissan, Hyundai and VW are the only three brands with a foot in both automaker and BEV building camps. Volkswagen was also second to Toyota for all car sales in 2018 but dropped to tenth place for BEV sales in the same year, added Chandrasekaran.
VW has negotiated a ten-year lithium supply deal from manufacturer Ganfeng as well as delivery deals with Samsung SDI, LG Chem, SK Innovation and Contemporary Amperex Technology Limited (CATL).
“Most recently, VW invested $1bn in Northvolt, a Swedish battery manufacturer. However, there have been issues with some of these companies, therefore threatening VW’s targets,” said Chandrasekaran.
The Road to EV Dominance
Volkswagen should have seven more manufacturing plants up and running by 2022.
Wood Mackenzie said VW will hit its estimate for 14 million EVs by 2028 (representing 27% of all global EVs and requiring 30% of battery cell supply) based on “planned production starts, capacity and small increases over time”.
But added that VW could hit 16 million EVs if it invests in three more sites for BEV manufacturing once its first eight reach capacity, increasing its overall market share projection to 39%.
The US-China Question
Volkswagen currently has two entry-level EVs on the global market – luxury and sport range.
Its NEV line-up may run aground in the face of “aggressive” Chinese policies on NEVs that favour China-only products, but Wood Mackenzie is still optimistic about VW’s EV future.
“Chinese policy can be a double-edged sword. A change to the range requirement of EVs meant the Passat plug-in electric vehicle did not qualify for subsidies and therefore was pulled from the market,” said Chandrasekaran.
“The US trade war weakened demand for VW products by just over 6% during the first half of 2019. If the trade war were to reduce demand by 5-8%, we would still expect VW to sell between 13.2 and 13.8 million EVs depending on the speed of recovery,” added Chandrasekaran.