Volkswagen bets big on EVs. Will consumers buy in?

Source: By David McHugh, Associated Press • Posted: Wednesday, September 11, 2019

Volkswagen is rolling out what it bills as the breakthrough electric car for the masses, the leading edge of a wave of new battery-powered vehicles about to hit the European auto market. The cars are the result of massive investments in battery technology and new factories driven by environmental regulation and concerns about global warming.

But it’s not at all clear whether consumers are ready to buy them.

Electric cars remain a niche product, with less than 2% of the market, due to higher prices and worries about a lack of places to charge. It adds up to a risky undertaking for the companies.

Volkswagen is betting that the ID.3, with a roomy interior, brisk acceleration and battery range of up to 340 miles for the top model, will change things. The company argues that the base price of under €30,000 ($33,000) means the ID.3 is “an electric car for everyone.” A key competitor, Tesla’s Model 3, starts as low as €36,800 ($40,000) in Europe, but the company’s website indicates it can run to well over €40,000 depending on options.

The ID.3 went on display yesterday ahead of the Frankfurt Motor Show. Volkswagen is also revealing a new logo; both moves are aimed at underlining the company’s transformation since its 2015 diesel scandal, in which the company was caught using software to cheat on emissions testing and paid more than €30 billion in fines and penalties. The company is positioning itself as younger and more oriented toward digital services and zero-local-emissions electric driving.

The company touts the ID.3 as a historic vehicle, the third chapter in the company’s history following the Beetle, which became a symbol of postwar German prosperity, and the Golf, of which Volkswagen has sold more than 35 million since 1974.

Volkswagen will start selling it in Europe next year, while in the United States, it will first launch an electric SUV at an as-yet-unspecified date.

The German company is deploying massive financial and manufacturing capabilities to make a success of its electric cars, saying it will have invested €30 billion in this area by 2023. It has sunk €1.2 billion into a factory in Zwickau in eastern Germany to make the ID.3, the first of eight electric-car plants worldwide, including one in Chattanooga, Tenn. The company, which sold 10.8 million vehicles last year, aims for 40% of its sales to be electrics by 2030.

Analysts warn that the industry could be saddled with slow-selling products that would undermine its earnings in a weakening global car market. Electrics were only 1.8% of the European market through the first six months of the year.

That’s because the launch of electric cars is so far mainly driven by regulation, not consumers. Above all, companies are rushing to make electric cars to meet tighter rules on carbon emissions and pollutants, particularly in the European Union and China.

“The industry has spent billions developing its new generation of electric vehicles,” wrote analyst Max Warburton at research firm Bernstein. “Clean sheet designs with dedicated platforms … have been engineered at great cost. Battery pack assembly plants have been built. Huge cell supply contracts with Asian suppliers have been signed.

“But this money is being spent without convincing evidence that customers are waiting for these cars.”

Finding a place to charge is another issue. Tesla has its own network of highway fast-charging stations. A consortium of automakers including Volkswagen aims to have 400 highway charging stations by 2020. But many more are required if electrics are to become mass-market cars.