VW’s CEO Mathias Mueller today announced a grand strategy 2025, accompanied by some very flashy numbers.
In brief, Mr Mueller is talking about VW selling “2-3 million” EVs per year by 2025. This would be roughly one quarter of VW’s output.
The announcement has a dubious smell. First, it refers to “30 new models” over ten years. That would be a new model introduction rate of one every four months. Out here in the real world auto manufacturers feel they have done very well if they produce a new model every four years. We don’t believe that VW can produce new models at ten times that rate.
The suspicion is that when Mr Mueller says “new model” he means a model variant, or an electrification of an existing model. Given that VW currently has some 330 model variants then three a year sounds more reasonable.
Second, we suspect that this is another hybrid/EV three-cup shuffle. The actual announcement uses the words “pure EV”, but we seriously question whether “pure” was not inserted by an overenthusiastic corporate marketer who doesn’t know what it implies.
If VW’s ambition is in fact to produce even 2 million “pure” EVs in 2025 then it needs to build battery plant with that capacity. To put that into perspective, that would be a plant some four times the size of Tesla’s Gigafactory. Better get a move on then.
But wait. Four Gigafactories will set VW back about US$20bn – this at the same time as it is providing another US$20bn for compensation to buyers of its Diesel cars and for fines and penalties.
That isn’t the only problem. VW’s current engine plant has a book value that is depreciating slowly – roughly 6% per year. If VW accelerates battery production at the pace described by Mueller it will pirate its own ICE output, rendering large parts of its ICE engine plant redundant. When that happens it will have to write off the undepreciated balance of a lot of book value – a multi-billion dollar hit to the bottom line (though not to cash).
Finally, as if everything above weren’t enough, VW’s strategy as announced predicts that most of those shiny BEVs (whether pure or hybrid) will be sold in the US – the market where VW’s brand has suffered its most acute damage.
To us this announcement looks like a hybrid volume prediction carelessly dressed up in pure BEV clothes. It might simply be a piece of noisy greenwashing at a rather sensitive time for VW in the USA.
By way of a footnote, what is also interesting is the dog that is not barking. While Toyota, Honda and Nissan are piling noisily into Fuel Cell EVs (FCEVs) VW appears not to be. The most recent Fuel Cell announcement on VW’s website that we can find is dated 2006.
One quote from this page is ironic: “Clean TDI engines will satisfy the strictest emissions laws in the world…”