Automakers Not Ready for Complete Shift to EVs: VW Boss

Slow and steady wins the EV race, as long as supply chains aren’t an issue.

byRob Stumpf| PUBLISHED May 9, 2022 5:28 PM
Automakers Not Ready for Complete Shift to EVs: VW Boss
Volkswagen
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German automaker giant Volkswagen has already declared war in an attempt to claim the global throne of top electric carmaker. But its battle won't be one that's won overnight, or this year, or maybe in the first half of this decade, even. Instead, Volkswagen is in it for the long game.

At the Financial Times’ Future of the Car summit, Volkswagen Group CEO Herbert Diess spoke on the automaker's plans to bolster its electric car sales throughout the decade. Diess also hinted at a point that CEOs of other car brands have made in the past, which is that it's simply too soon to immediately shift to 100 percent electrification across the auto industry as a whole. For Volkswagen, the brand's movement forward is instead best approached in a slow and steady fashion, namely in part due to the lack of charging infrastructure to support the growing demand for EVs on a global scale.

“Everything will be there for growth, but it takes huge investment and time to achieve,” Diess said, as quoted by Autocar. “We need the correct plants to be modified or built, the battery production capacity to be available and to build a secure, sustainable supply chain. The customer needs the correct infrastructure to be put in place to live with the cars.”

The shift away from the internal combustion engine is more of a marathon than a sprint. To Diess' point, the auto industry almost needs to move in lock-step with the infrastructure required to support the millions of new electric cars hitting the road each year—that includes both charging infrastructure and the supply chain needed to actually build the vehicles.

Last week we learned that Volkswagen's EV order books are essentially full for 2022. This doesn't necessarily speak for or against the demand for the automaker's products, but instead focuses on the weak link that is the auto industry's fragile supply chain. VW Group's shortage of crucial electronics due to the ongoing global semiconductor shortage is exacerbated by the Russia-Ukraine conflict that has caused a shortage of wiring harnesses for vehicles across its brands.

Likewise, government backing for charging infrastructure is still very much in its infancy. Proposed funding in the U.S. would strengthen charging along highway corridors for EV drivers, though those who live in urban environments or in apartment complexes still lack charging where it matters the most—at home. Without the proper infrastructure necessary to support electric cars, consumer demand may be limited by access to an EV charger.

All of this isn't to say that EVs are dead in the water. Far from it, actually, as the Volkswagen Group continues to invest in electrification by tightening up its control over the supply chain—starting with battery factories peppered all over Europe. Diess believes that the Volkswagen brand can take on rivals like Tesla and become the global leader in EV sales by the middle of the decade.

“Our goal is to be the world leader in EV sales by 2025. We have a very ambitious plan to achieve that and have invested hugely to achieve it, but some analysts aren't taking the amount of effort required to achieve our goals seriously enough,” Deiss said.

Diess also said that while Volkswagen may have taken a top-down approach to investing in EVs, it has identified demand for smaller electric cars and determined that the anticipated margins for the platforms are profitable—in fact, Diess says that the automaker expects that by 2025, it may be the proper time to introduce a Polo-sized EV.

"We have a new generation of batteries; aside from the raw material price rises, now our costs are coming down with scale," said Diess. He later continued: "The demand is there and the margins are there for small electric cars to be profitable."

For us the U.S., that might mean something similar to the beloved Honda E is in the cards. Maybe. One can dream.

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