Volkswagen’s Elusive Quest to Make an EV for the Masses
The German automaker behind iconic models such as the Beetle is trying to find similar success in the EV market
BERLIN—Almost a decade ago, Volkswagen VWAPY -0.49%decrease; red down pointing triangle set out on an expensive quest to dominate the new world of software-defined cars and build the electric “people’s car.” It is still trying.
The German automaker has invested billions of euros, retooled entire plants and created new software and battery companies to assist in making the transition. However, VW has yet to produce an EV that has matched the success of its historic gas-powered models such as the Beetle and the Golf in its core markets.
Sales of its electric flagship, the ID. series, have disappointed. So VW decided against scrapping the 50-year-old Golf, and it is developing an all-electric version that the company said could be launched by the end of the decade.
Building and selling the electric car for “everyman” remains a core mission of Volkswagen, which translates as “people’s car.” In an attempt to reinvigorate VW’s mass appeal, the company is in the midst of a major restructuring so that it can produce profitable, desirable electric vehicles.
“VW also wants to get very young people excited about the brand,” said Oliver Blume, who has the dual role as chief executive of Porsche and CEO of the entire VW company, which includes VW, Porsche, Audi, Bentley and Lamborghini, in emailed comments.
Other automakers, such as General Motors and Ford Motor, have also been paring their electric ambitions, with some scaling back their production plans.
In VW’s case, Blume has launched a plan to slash 10 billion euros in costs, equivalent to around $11 billion, halt plans to build a new ultramodern EV factory in Wolfsburg and postpone plans for further battery plants in Europe.
The cuts are aimed at lowering the cost of making vehicles, which would boost earnings and give VW more flexibility to lower prices for entry-level EV buyers. Earlier this year the company unveiled the ID. 2all, a small hatchback that the company says will sell for less than €25,000 and is one of 10 new EVs that VW is slated to launch by 2026.
“As a young man I was also an enthusiastic Beetle and Polo driver. And there are very many customers who have such positive experiences and develop a close connection to the Volkswagen brand,” Blume said.
Blume said the company was working to develop a more affordable EV that could sell for €20,000 in the second half of the decade, a move to counter Chinese and other competitors entering the European market with cheap EVs.
VW executives have warned staff of a tough year ahead.
“The situation is very critical,” Thomas Schäfer, CEO of VW’s namesake brand, told labor representatives at a meeting in Wolfsburg at the end of November, according to a transcript seen by The Wall Street Journal. “With many of our current structures, processes and high costs, we are no longer competitive.”
VW said on Dec. 19 that it had reached an agreement with union representatives to slash labor costs in administration by 20% through early retirement, expanding buyouts and not filling positions made vacant by retirements.
The impact of these measures could provide “a positive contribution to earnings totaling 10 billion euros,” VW said in a statement, with the aim of doubling the profit margin of the VW brand to 6.5% by 2026.
In addition to reducing the workforce, VW has also scrapped plans for new buildings and plans to speed up the time it takes to get products to market, by offering fewer feature options and slashing new model development time to 36 months from 50 months now.
VW remains a combustion-engine behemoth: The company said it sold 8.3 million vehicles worldwide in the first 11 months of the year, a gain of about 12% from a year ago.
VW has also taken strides as it shifts its business away from conventional cars. With all brands and models combined, the company has a 20% share of new EV sales in Europe this year, according to data from ev-volumes.com, ahead of Stellantis and Tesla—an edge VW hopes it can soon extend to the rest of the world.
EVs from the company’s VW brand are losing market share in Europe, according to a report on sales through October by ev-volumes analyst José Pontes. He said the VW brand now has about 8.2% of the market, slightly behind BMW and trailing Tesla, which has 12% market share.
Tesla has the bestselling all-electric models in Europe but, after a rocky start, VW’s ID. 3 and ID. 4 all-electric cars, the Audi Q4 e-tron and Skoda’s Enyaq iV—also a VW brand—are gaining traction. Amid its push to get those models to market, VW has dealt with high costs, low productivity, launch delays caused by substandard software and a shaky global economy.
Blume is overhauling the software unit, Cariad, which has struggled to supply software on time to meet the deadlines for product launches, forcing Audi and Porsche to delay model launches.
Earlier this year, Blume reshuffled the unit’s management and launched a restructuring program to accelerate software development. The unit will focus development on near-term launches of group vehicles and move more visionary and complicated software projects—such as autonomous vehicle software—to the back burner.
In China, a new generation of homegrown low-cost, high-tech electric models have overtaken the German company’s EVs in the country, which accounted for about 34% of its sales in the first 11 months of the year. So far this year, VW sales barely grew in China, its weakest showing in major markets worldwide. The new Chinese competition is also targeting Germany and Europe.
Although VW produces vehicles in China, its EVs tend to be more expensive than its Chinese competition. Analysts said VW failed to offer midrange EVs that are in high demand in China and misread Chinese consumers’ preferences, which prize high-tech gadgets in their cars.
To claw back lost market share, VW has invested in the Chinese startup XPeng to acquire technology for new vehicles that will come to market in the next few years. VW is also building up huge R&D facilities with Chinese software engineers in the country.
“A car company can’t be turned around in one year, but with our medium and long-term measures we are on the right course,” Blume said.