A new spark VW revamps production for the electric age

The world's biggest carmaker plans to make rechargeable vehicles at three German factories, snubbing the technology that spawned Dieselgate. One plant will churn out models half the price of a Tesla.
The future according to VW.

In its boldest move yet towards future mobility, Volkswagen has announced it will build electric cars at two more German sites from 2022. The world's largest carmaker, eager to shed its "dirty diesel" image, will refit existing plants in Emden and Hanover to build rechargeable models based on a new drive architecture.

VW is already investing €1.2 billion ($1.4 billion) in a factory in Zwickau, eastern Germany, to churn out up to 330,000 battery-driven autos by the end of next year. Together with the other two plants and one in China, VW will be able to produce a million of them every year, for brands including Audi, Skoda, Seat and Porsche.

Last year, VW had earmarked €34 billion to invest into electric and digital car technologies by 2022 as it prepares for a shift in demand and hopefully puts Dieselgate behind it. The emissions-cheating scandal that came to light in 2015 has cost the company €26.4 billion in fines, settlements, legal costs and damage claims.

Following the fraud, which has prompted hundreds of investor and consumer lawsuits in Europe and elsewhere, VW decided to gradually shift part of its production capacity of 10 million vehicles towards electric cars. It already has some electric models on offer, such as the e-Golf, but success has so far been limited.

The rise of Tesla and other electric-car startups served as a wake-up call to VW and its local peers, BMW and Mercedes-Benz parent Daimler, to ramp up electric car manufacturing. Demand for diesel has also fallen in Europe, where cities have started banning older models because of air pollution. With ever fewer customers interested in one of VW's flagship combustion models, the Emden-manufactured Passat saloon, the carmaker faces extra pressure to act.

Patience required

The new plants will usher VW into the electric age. Once it's remodeled, the Emden plant will be able to handle 300,000 e-vehicles per year, Handelsblatt has learned. One model, loosely based on the compact car Polo or the small SUV T-Roc, should cost less than €20,000 ($22,612). Its working title is “ID crossover utility vehicle.” ID is a label for VW’s new electric car models.

A few weeks ago, Herbert Diess, boss of VW Group since April, promised to offer an e-car half the price of a Tesla. The low-cost vehicle to be built in Emden might be VW’s answer to Tesla’s mass-market vehicle, the Model 3, which sells from $46,000 in the US, excluding tax and subsidies. German customers will be able to buy a Model 3 next year, but will have to wait four more years to pick up VW’s cut-rate rival.

The same applies to e-cars produced in Hanover, northern Germany. An hour’s drive from VW’s headquarters in Wolfsburg, the plant is slated to make electric Transporter vans from 2022. The facility will still roll out combustion-powered vehicles but also the ID Buzz, a modern makeover of the iconic 1960s "hippie bus." VW plans to make around 100,000 ID Buzz vans per year.

VW’s Chinese joint venture SAIC Volkswagen is also building an electric-car plant in Anting, near Shanghai, which will be able to make 300,000 e-vehicles per year from 2020.

As the demand for e-cars rises, VW may designate more production locations. That's probably its only way to survive if combustion vehicles go the way of the horse-drawn buggy.

Stefan Menzel writes about the auto industry focusing on Volkswagen. Martin Murphy covers the steel, car and defense industries for Handelsblatt. Gilbert Kreijger is an editor with Handelsblatt Global. To contact the authors: [email protected][email protected] and [email protected]