Friday, 3 November 2017

Plug-In Hybrids? Pah! Not from Volkswagen in America

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2017 Volkswagen e-Golf EV

Volkswagen will spend the next five years charging to fill showroom floors with a range of five battery-electric vehicles (BEVs) and 48-volt hybrids, but it will leave a very obvious gap in between: It now has no plans to sell a single plug-in hybrid (PHEV) car or SUV in North America. Not only that, it might not even sell one in its European home market.

Volkswagen brand boss Herbert Diess has turned away from the Dieselgate recovery plans devised under former Volkswagen Group of America boss Michael Horn, which called for replacing its not-so-clean-after-all diesels with really clean PHEVs. Diess even said that he believes Volkswagen can still turn its Tiguan into the world’s biggest-selling SUV without offering plug-in hybrid technology in two of the world’s three biggest car markets.

Plug-ins or not, Volkswagen is committed to a forecast of selling at least a million BEVs a year by 2025, with about 200,000 of those slated for North America. Unlike other, better-known BEV makers, Volkswagen insists its cars will be profitable from Day One.

In a crisp, staccato dinner conversation, Diess brushed through questions about Volkswagen’s patchy plug-in strategy like this:

  • C/D: You say the Tiguan will become the world’s biggest selling SUV, but it doesn’t have a hybrid powertrain yet.
  • HD: No, not in Europe.
  • You showed the concept car originally as a hybrid, and it’s not a hybrid.
  • We will have a hybrid.
  • In Europe?
  • It’s not yet decided.
  • In America?
  • No. For America, plug-in hybrids don’t make a lot of sense for the upstream emissions, and they’re just not incentivized by the tax schemes.
  • So we’re looking at a China-only hybrid?
  • Not yet decided . . . We have time to decide. Plug-ins don’t make a lot of sense for us in America—decided. They might make sense for us in Europe—not decided. They make sense in China—decided.

Tiguan PHEV Concept Detroit

Volkswagen Tiguan GTE Active Concept, a plug-in hybrid displayed at the 2016 Detroit auto show.

That doesn’t rule out a hybrid Tiguan without plug-in charging ability, of course. But Diess is clearly moving more of VW’s eggs into the BEV basket.

After he was blindsided by Dieselgate when he arrived at Volkswagen from BMW in 2015, it has fallen to Diess to clean up the mess. The lion’s share of the effort falls to the Modular Electrification Toolkit (MEB), a purpose-designed battery-electric architecture that is supposed to spread across segments, like the MQB gasoline/diesel architecture that underpins everything from the Eurocentric sub-Golf Polo hatchback to the seven-seat Atlas SUV.

Diess believes the switch into BEVs will be cheaper and easier to develop than most people think, with Volkswagen’s electric range profitable from its first day.

MEB will host all of the Volkswagen brand’s five planned BEVs, plus 10 more from the group’s other brands such as Škoda and Seat. Others, Diess hinted, are sure to follow, with cheaper development costs opening the door on a tantalizing array of low-volume body styles. Diess believes the switch into BEVs will be cheaper and easier to develop than most people think, with Volkswagen’s electric range profitable from its first day.

“In the brand, we are spending about [$3.5 billion, including development costs and capital expenditures] over five years,” he said. “You always have in your product range more profitable cars and less profitable cars. We will already achieve with the first car [the I.D. hatch] the same profit range we achieve with the Polo. I think that’s okay. That’s not great, but it’s okay. That includes the sunk investment.”

Reminded that Daimler chairman Dieter Zetsche said that electrifying Mercedes-Benz would soak up half the brand’s conventional investments, Diess just shrugged and smiled.

“Yeah, you know, we are big in volumes. For Volkswagen, it makes a lot of sense to make a specific architecture. We have big volumes now, and we are going toward one and a half and two million cars a year off that electric platform. That makes a lot of sense to have a specific electric architecture. The economies of scale are really getting thin up there, and you can really unleash the potential of the electric cars.

“Fifteen cars are already decided. The Volkswagen brand will have five, and the group will have 15. Well, five so far. We are adding one a month, it seems.”

MEB is even engineered to accommodate a future of solid-state batteries, possibly as early as 2024. High-end consumer electronics brand Dyson recently claimed it will bring its first car, powered by a solid-state battery, to market by 2020, but Diess laughed off the timetable.

“Not for the first generation of [solid state] batteries,” he said. “Solid state can only kick in for ’24 or ’25. To say 2020, that’s courageous!”

He said VW is “hedged” on solid-state technology via an investment in a California startup, a spinoff from Stanford University called QuantumScape. “There are ups and downs. They are safer in crash conditions, but the energy density is not so much higher. It’s another 15 percent or so.”

Volkswagen’s move into the world of BEVs won’t be great for every German. VW’s own dealers, in particular, are in the crosshairs. The company told its German dealers that all of their agreements would be canceled in 2020 to make way for a smaller dealer body, more direct factory-to-customer interaction, and over-the-air (OTA) software updates. Volkswagen is also canceling contracts across Europe because they don’t allow for the direct contact Volkswagen would legally need for OTA software delivery.

“The big revolution,” he said, “comes with the cars becoming updatable and upgradable. When we have the operational system in the car, you will receive an update to your system every year or so.

“Today, we don’t talk to customers [directly],” Diess said. “But we think differently [than] Tesla. We think we can do it together with our dealers and share the data to provide even better service.”

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