Volkswagen has big ambitions when it comes to battery-electric vehicles, aiming to increase sales to 1.3 million vehicles by 2023, with EVs on a rapid path to matching the profitability of the company’s gas- and diesel-powered models “earlier than planned,” CEO Herbert Diess said during the company’s annual meeting.
The German automaker recently outlined plans to switch entirely to battery power, Diess setting a goal of toppling Tesla as the world’s best-selling manufacturer of battery-electric vehicles. But he cautioned earlier in the week that it will be “a tight race.”
The Volkswagen Group — which includes brands as diverse as Seat, Audi, Bentley and Lamborghini, as well as VW — expects to spend more than $110 billion on its electrification program. To help fund that effort it plans to stage an IPO for Porsche during the fourth quarter, Diess confirmed during the stockholders meeting.
Initially late to buy into electrification, VW is moving quickly to launch new models — and even a new brand. It confirmed this week it will revive the old Scout name it acquired from Navistar and introduce an all-new marque focusing on electric SUVs and pickups. Production is set to begin in 2026.
With all-electric models such as the ID.4 now on sale, VW delivered about 452,000 BEVs worldwide last year and Diess forecast the number will grow to 800,000 this year. By 2023, the goal is 1.3 million. And Diess expects VW to be the world’s leading EV producer by 2025.
Getting there will be aided not only by the introduction of new models like the ID.Buzz microbus but by the start of production of a new EV line in the U.S. It has spent about $800 million to expand its factory in Chattanooga, Tennessee to handle battery vehicles. That will start with a new version of the ID.4, with a second BEV to follow.
Demand for the imported version of the ID.4 is strong, and interest in the ID.Buzz coming to the U.S. in 2023 is “through the roof,” according to Scott Keogh, CEO of Volkswagen Group of America. In March, VW said it was increasing its EV-focused investment in the U.S. to $7.1 billion to support growth.
That will put Volkswagen in more direct competition with Tesla. But the U.S.-based company is taking the fight back to VW’s home market. It opened two new factories in recent months, one just outside Austin, Texas. The other is in Berlin, an hour’s drive from Volkswagen’s corporate headquarters and its largest manufacturing center in Wolfsburg.
For its part, Tesla’s global sales came in just short of 1 million last year but will surge well past that number in 2022, industry analysts anticipate.
Knocking Tesla off its throne won’t be easy, Diess cautioned earlier this week at the FT Future of the Car conference. “It will be a tight race but we won’t give up on it,” he said, adding, “I have to say we didn’t expect our main U.S. competitor to be so fast and well-prepared.”
A profitable outlook
The size of Volkswagen’s planned EV investment has generated controversy and some concern from investors. The timing to earn that money back has been a key issue. Even now, most manufacturers are losing money on their electric vehicles. But they hope to reverse that as sales volumes rise and they drive down the cost of components — batteries, in particular.
And VW says that shift is underway. “We expect that the e-mobility business will be as profitable as the combustion engine business earlier than planned,” Diess told shareholders, though he didn’t lay out a hard date.