The EV incentive program proposed by Congress has generated plenty of opposition, primarily from foreign manufacturers and non-union automakers in the U.S. that fear the current proposal could wind up giving Detroit’s Big Three a major competitive advantage.
But rather than trying to scuttle the proposal entirely, a senior Volkswagen official is holding out an olive branch. With some key revisions, U.S. Chief Operating Officer Johan de Nysschen said VW would not only back a new incentive program but also be ready to expand EV production in North America.
Under the plan that the U.S. House Ways & Means Committee is now studying, the current $7,500 EV tax credit would be extended and expanded. Brands like Tesla and General Motors who lost incentives after hitting the previous 200,000 unit sales threshold would have the givebacks reinstated. The controversy centers around a proposal, the Kildee/Stabenow “Made in America” provision, that would add $4,500 for vehicles built in the U.S. using union labor and another $500 for batteries made in the U.S.
That has generated strong opposition from manufacturers who could lose out on the added cash, Volkswagen Group of America COO de Nysschen telling TheDetroitBureau.com that the proposal, as it stands, “doesn’t seem fair.”
Like Toyota, Tesla and others, VW opposes any benefit that specifically earmarks manufacturers who use union labor. Right now, only GM, Ford and Stellantis would qualify there.
But he also raises concerns about any proposal that would limit incentives to EVs made in the United States. Like other manufacturers — including Detroit’s Big Three — VW modified its production strategy to comply with the USMCA, the 2018 update to the North American Free Trade Agreement. That was the deal the industry signed up for, de Nysschen stressed during an interview Tuesday evening. And for VW, he said, it was the basis of a multi-billion-dollar investment and production strategy.
“I understand that the source of (funding)” for a new incentive program “is the U.S. taxpayer, and it would be hard to argue it should support imports, but,” the industry veteran said, “At the very least,” vehicles assembled under the USMCA — including Canada and Mexico — should be included.
VW introduced its first long-range battery-electric vehicle to the U.S. market late last year, and demand for the ID.4 SUV has grown steadily. Currently, it’s imported from Germany but production will shift to the U.S. during the third quarter of 2022, after an $800 million expansion of Volkswagen’s assembly plant in Chattanooga. A second model is expected to follow, with the Tennessee plant getting capacity to assembly up to 130,000 BEVs annually, on top of the gas-powered models it currently produces.
While those models would get a tax credit under the House proposal, the plan would exclude BEVs coming from the massive VW assembly complex in Puebla, Mexico. That includes the ID.Buzz van set to reach showrooms in 2023, as well as other models that could go into Puebla.
By 2030, said de Nysschen, VW expects that battery vehicles will comprise 50% of its U.S. sales.
And the automaker, he said, would be ready to make even more investments in local production, including the U.S., if any eventual incentive bill passing Congress would cover vehicles made under USMCA.
Long-term goals could depend upon final bill
Eventually, he said, “all off Chattanooga, and all of Puebla” would be switched to EV production.
Getting incentives will be critical, de Nysschen added, because BEVs are going to remain more expensive to build — and to buy — than gas-powered models for some time.
The bigger the incentives, “that enables us to make the investment” in production by helping turn EVs into a profitable business case. Today, said de Nysschen, “EVs are loss leaders.”
The automaker’s global CEO Herbert Diess has already indicated that VW will increase the line-up of EVs it sells in U.S. Beyond the ID.Buzz, however, the company has not identified what’s in the pipeline. But de Nysschen offered one hint, suggesting there is “a segment large enough” to justify adding a large EV similar to the current VW Atlas model, even while keeping the gas-powered version in the line-up.