German auto giant Volkswagen has announced yet another affordable electric vehicle is in development, just days after multiple announcements on major EV investments and new models.
According to Autocar Volkswagen passenger car brand CEO Thomas Schäfer has admitted that the automaker is working “full steam ahead” on a sub-€20,000 ($A30,000) all-electric ‘ID 1’ which is planned to launch around 2027.
On producing a €20,000 profitably Schäfer said “it’s not an easy game at all”.
“Now we can do a lot in terms of economies of scale. Within our volume brand group, we’re producing four vehicles along with Cupra and Skoda. That volume will help us to bring prices down to be competitive and also still make money.” he said.
The ID 1 will cost €5,000 less than the €25,000 Golf sized ID 2all which was foreshadowed on Wednesday.
VW signals the ship is turning but is it fast enough?
It’s been a big week for Volkswagen which also announced it would invest over $US130 billion into electrification and digitisation with Volkswagen Group, CEO Oliver Blume saying “We must transform”.
Along with other legacy automakers Volkswagen has come under intense pressure – from policy makers, environmentalists and consumers – for its failure to make a more rapid shift to electric vehicles.
This week’s announcement of over $100 billion investment into battery and EV factories, as well as the new ID. 2all announcement, appear to signal that VW is finally starting to get serious.
But is it fast enough? With both the ID. 2 and and ID. 1 not scheduled for sale for another four years, huge questions remain over whether Volkswagen can execute the manoeuvre in time.
Cathy Wood, from Ark Invest, forecasts that fully electric vehicle sales will reach 90% of global car sales in 2027 as consumers become aware of the shift taking place, causing demand for petrol and diesel cars to collapse completely.
Although this prediction may sound extreme now, analysts and futurists like Tony Seba have shown that technology shifts throughout history take place in the form of “s-curves” where uptake is slow to begin but then accelerates dramatically.
With global EV market share reaching over 10% globally in 2022 and recent December figures for major markets like Germany and the UK reaching as high as 33%, a global uptake rate of well over 50% by 2027 is a very plausible predication.
If this plays out it would mean that legacy automakers like Volkswagen and Toyota would likely seed huge chunks of market share to companies that already produce EVs at scale like BYD and Tesla before they can bring their mass produced EVs to market.
Like Toyota, Volkswagen’s debt is fixed but its assets aren’t
The fact that liabilities are fixed but assets aren’t must be the most fear inducing truth facing coal, oil and gas companies as well as manufacturers of petrol and diesel cars.
Even before Volkswagen recently announced it would invest $US180 billion on electrification and digitisation, like Toyota, Volkswagen was already sitting on around $US200 billion of debt.
And like Toyota, this debt is “balanced” on Volkswagen’s balance sheet with hundreds of billions of dollars of “assets” which are largely factories and equipment which are solely dedicated to making petrol and diesel cars. Products that the world is now rapidly “s-curving” away from.
The asset valuations of Volkswagen and Toyota’s factories are based on their current share of the global petrol and diesel car market. The task ahead of Volkswagen and Toyota is to somehow develop EV production fast enough to keep their market share and produce enough EVs with enough margin to service their debt.
And they must manage to do all this while somehow pretending to their shareholders that they don’t have hundreds of billions of dollars worth of stranded assets on their books.
Whether or not these industrial giants can perform this manoeuvre over the next few years will have massive implications not only for the companies themselves but also for their nation’s economies.
Daniel Bleakley is a clean technology researcher and advocate with a background in engineering and business. He has a strong interest in electric vehicles, renewable energy, manufacturing and public policy.