Volkswagen AG’s comprehensive electric vehicle plan no longer exists.
VW’s namesake brand, which has made its ID family of electric cars a staple of its future, admitted last week that it will need more hybrids as electric car sales slow.
This marks the latest adjustment Volkswagen has made to its electrification strategy after the company bungled several model releases and fell behind China, where local brands now dominate. The manufacturer also halted its efforts to seek outside investors for its battery unit and scrapped plans for a €2 billion ($2.2 billion) electric vehicle factory in Germany.
In fact, the automaker sells so many cars still powered by combustion engines that it is on track to exceed emissions limits next year, prompting CEO Oliver Blume to ask European regulators for leniency. It’s a sharp shift from just three years ago, when strong pressure from Volkswagen to buy electric cars in the European Union led to rifts between the company and some of its peers in the region.
Volkswagen had no choice but to rely on its electrification messages after betting big on “clean” diesel engines. But that bet went awry when the company was discovered cheating on emissions tests, forcing it to shift heavily to battery-powered vehicles. By 2019, then-CEO Herbert Diess announced that up to 75 fully electric models would be launched over the next decade.
His “electric car or bust” strategy — Diess argued that automakers needed to change quickly if they wanted to survive — angered executives from Turin to Tokyo, who wanted more time and flexibility to make the switch from combustion cars. The CEO even praised what he saw as the advantage of moving early.
Electric mobility “has won the race,” Diess said when presenting Volkswagen’s battery strategy in 2021. Many in the industry questioned our approach. Today they are following suit, while we are reaping the benefits.”
While these spoils were not as plentiful as VW had hoped, the company did not switch away from electric cars entirely.
Blume has partnerships with companies including Xpeng Inc. It is preparing a new electric car brand in China, offering models equipped with gadgets such as an in-car avatar to win back the young consumers lost to BYD and Tesla Inc. Discussions with European counterparts including Renault SA about developing cheaper electric vehicles to attract mass market car buyers.
Volkswagen isn’t alone in having to recalibrate as a result of the electric vehicle slowdown. Countries such as Germany and Sweden have halted or reduced government subsidies for electric cars, which still tend to be more expensive than their combustion-powered counterparts, hurting the broader sector. Gaps in public charging networks also continue to turn away potential buyers.
Stellantis NV said on Tuesday it will sell cars co-developed with a Chinese partner in Europe from September as it tries to lower the cost of its electric offerings. Mercedes-Benz Group AG has stopped developing the underpinnings for new electric luxury sedans to save money and plans to sell gasoline-powered cars for longer than expected. Still, BMW AG, which has had more success selling electric cars than its German rivals, warned this week that a European Union plan to effectively ban sales of new combustion-engined cars by 2035 would hurt the industry. European regulators are scheduled to review the policy in 2026.
The slowdown has dealt a serious blow even to Tesla, which has lost $235 billion in market value this year, more than three times Volkswagen’s current valuation. However, CEO Elon Musk criticized the automakers for backing down.
“The global adoption rate of electric vehicles is under pressure, and many other automakers are pulling back from electric vehicles and pursuing hybrids instead,” Musk said last month when discussing Tesla’s first-quarter earnings. “We believe this is not the right strategy, and that electric vehicles will eventually dominate the market.”
