Volkswagen’s plans to go all-in on electric vehicles are gone.
The eponymous Volkswagen brand sees its ID range of electric vehicles as central to its future, admitting last week that it will need more plug-in hybrids as EV sales slow.
It marks the latest change in Volkswagen’s electrification strategy after it launched several models and lagged behind in China, where local brands currently dominate. The manufacturer has also shelved efforts to seek outside investors for its battery unit and scrapped plans to build a 2 billion euro ($2.2 billion) electric vehicle factory in Germany.
In fact, so many cars sold by the automaker still use internal combustion engines that it is expected to exceed its emissions limits next year, leading Chief Executive Officer Oliver Blume to ask European regulators for leniency. It’s a sharp turn from three years ago, when Volkswagen lobbied aggressively for electric vehicles in the European Union, causing a rift between the company and some of its peers in the region.
After betting heavily on “clean” diesel engines, Volkswagen has no choice but to rely on its electrification message. That bet went awry when the company was found to have cheated on emissions tests, forcing it to switch to battery-powered vehicles. By 2019, then-CEO Herbert Diess announced the launch of as many as 75 all-electric models over the next decade.
His electric-or-bust strategy — which Diess believes automakers need to change quickly if they want to survive — has angered executives from Turin to Tokyo, who want more time and flexibility to transition away from combustion vehicles. The CEO even praised what he saw as the first-mover advantage.
Introducing Volkswagen’s 2021 battery strategy, Diess said that electric vehicles “win the race.” Today, they are following suit, and we are reaping the results.
While those gains aren’t as big as VW had hoped, the company isn’t giving up on electric vehicles entirely.
Bloom is forging partnerships with companies such as Xpeng Motors and is preparing to launch a new electric car brand in China, offering models equipped with gadgets such as in-car avatars, in a bid to win back rivals BYD Corp and Tesla Inc Lost young consumers.
Volkswagen isn’t the only company having to recalibrate as EV development slows. Countries such as Germany and Sweden have stopped or cut subsidies for electric vehicles, but electric vehicles remain more expensive than gasoline-powered vehicles, hurting the broader industry. Gaps in the public charging network also continue to deter potential buyers.
Stellantis NV said on Tuesday it will start selling cars developed with Chinese partners in Europe from September in a bid to reduce the cost of its electric products. Mercedes-Benz Group has halted development of the infrastructure for a new electric luxury sedan to save money and plans to sell gasoline cars longer than expected. BMW, which has been more successful than its German rivals in selling electric cars, warned this week that EU plans to effectively ban new internal combustion engine car sales in 2035 would hurt the industry. European regulators will review the policy in 2026.
The economic slowdown has hit even Tesla hard, with the company losing $235 billion in market value this year, more than three times VW’s current valuation. Still, CEO Musk criticized the automaker for going back on its business.
“Globally electric vehicle adoption is under pressure and many other automakers are reducing electric vehicle production and pursuing plug-in hybrids instead,” Musk said last month when discussing Tesla’s first-quarter earnings. We don’t think this is the right strategy and EVs will eventually dominate the market.”
