Volkswagen will invest 80 billion euros ($91 billion), in the mass production of electric cars. The strategy is generated by EU and Chinese emissions regulations preventing the global warming and making electric vehicle adoption inevitable.
The company, whose ID electric car will hit showrooms in 2020, has set a deadline for ending mass production of combustion engines. The final generation of gasoline and diesel engines will be developed by 2026.
Customers have meanwhile largely shunned electric vehicles because they are too expensive, can be inconvenient to charge and lack range.
Carmakers have failed to mass-produce electric cars profitably largely because of the prohibitive cost of battery packs which make up between 30 percent and 50 percent of the cost of an electric vehicle. A 500 km-range battery costs around $20,000, compared with a gasoline engine that costs around $5,000. Add to that another $2,000 for the electric motor and inverter, and the gap is even wider.
Even electric start-up Tesla’s cheapest car, the Model 3, is on sale in Germany at 55,400 euros and in the United States, the prices start at $35,950.
Volkswagen believes its scale will give it an edge to build an electric vehicle costing no more than its current Golf model, about 20,000 euros, using its procurement clout as the world’s largest car and truck maker to drive down the cost.
“On a 2025 view, we expect Volkswagen to be the number one electric vehicles producer globally,” UBS analyst Patrick Hummel said. “Tesla is likely to remain a niche player.”
EU lawmakers agreed in last December a cut in carbon dioxide emissions from cars of 37.5 percent by 2030 compared with 2021 levels. This was after the European Union forced a 40 percent cut in emissions between 2007 and 2021. Every gram of excessive carbon dioxide pollution will be penalized with a 95 euros fine from this year onwards.
Daimler, BMW, PSA, Mazda and Hyundai will miss their 2021 average emissions targets, PA Consulting forecasts. Toyota, Renault-Nissan-Mitsubishi, Volvo, Honda and Jaguar Land Rover are on track to meet their goals.
Carmakers have struggled to lower their average fleet emissions because of a shift in customer taste toward heavier, bigger SUVs (sports utility vehicles), which make it harder to maintain the same levels of acceleration and comfort without increasing fuel consumption and pollution. SUVs are now the most popular vehicle category in Europe, commanding a market share of 34.6 percent, according to JATO Dynamics. Even Porsche relies on sports utility vehicles for 61 percent of sales.
Meanwhile, electrical or not, Volkswagen Group includes Audi, Porsche, Bentley, Seat, Skoda, Lamborghini and Ducati. Which one would you ride?