‘Leapfrog’ Tesla In Electric Car Race Being Planned By Volkswagen

As it redirects its attention to battery-powered vehicles and emerges from the 2015 diesel emissions scandal the Volkswagen car brand said it is confident it will “leapfrog” the competition and become a leader in electric cars by 2025.

It would target 1m electric car sales by 2025, said the VW brand, by far the biggest company in the 12-brand Volkswagen Group.

Tesla, the US electric carmaker that sold fewer than 80,000 units last year but has pledged to build 1m a year by 2020, therefore now becomes the main rival for the German car company.

“Anything Tesla can do, we can surpass,” declared Herbert Diess, head of the VW brand at its Wolfsburg headquarters.

Moreover, VW will achieve in the volume market what Tesla will achieve in the premium market, he said. “We are confident that in this new world we will become a market leader,” he added.

One of the big debates in the car world is formed by the electric ambitions of VW and Tesla. The question making the rounds is that is it easier for a traditional carmaker with scale to transform its operations or for a start-up with proven technology to scale up?

a wider rollout of its “MQB” platform, or car-building architecture, which helps the different VW brands to share parts, technology and assembly sequences, will help to possess and make chances brighter for VW to have “leapfrogging cost advantages”, Mr Diess said.

“[Tesla] is a competitor we take seriously. Tesla comes from a high-priced segment, however they are moving down,” Mr Diess said, referring to the $35,000 Model 3, which enters production this summer. “It’s our ambition, with our new architecture, to stop them there, to rein them in.”

what VW called its “first” annual press conference — an odd phrasing for a company that is 80 years old was the occasion that Mr Diess was speaking at. A clear line between the VW brand and the VW Group is being very significantly drawn by Mr Diess who was a cost-cutting executive who was poached from BMW in July 2015. But under Martin Winterkorn, the former chief executive who led both until 2015, the line between them was often hazy.

Certain group-level activities from the brand’s balance sheet have bene started to being separated in order to enhance the value of the VW brand. While margins were 2.1 per cent rather than 1.8 per cent, 2016 operating profit was €1.6bn, instead of €1.9bn as reported under the new structure.

To ramp up investments in both electric and combustion engine technology, all the while cutting costs overall is the challenge for the VW brand’s transition towards electric mobility.

“We foresee substantial financial burdens looming,” said Arno Antlitz, chief financial officer for the brand.

However, savings from the “future pact”, a deal reached last November to cut €3.7bn in costs and reduce headcount by 30,000 globally by 2020, would overcompensate the increased capital spending, he said.

VW would become a leader in three stages, Mr Diess said. Achieving operating margins of at least 4 per cent, by focusing on enhancing productivity by 25 per cent, and improving profitability by cutting costs from now until 2020, will be the first phase.

And then until 2025, while boosting margins to 6 per cent, taking the lead in electric, connected cars, is the second stage. Doubling down on mobility solutions by VW after 2025 is the final stage.

Mr Diess said that a “substantial reduction of complexity in the new line-up” is central to VW’s plan. It will be on a solid foundation to sell electric cars at the price of today’s diesel models, for profit, if VW can achieve that. “The entire electric fleet,” he added, “is to be profitable from the very beginning.”

(Adapted from Financial Times)


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