By on September 13, 2018

Just a year ago, Volkswagen Group announced it wasn’t just going to build a series of standalone electric car models — it wanted an EV version of every model in its stable. The automaker may as well have tried buying the rights to the Green Giant mascot from B&G Foods, too.

A year later, former CEO Matthias Müller’s replacement is discovering that lofty promises don’t come cheap. The automaker’s goal is well out of reach, unless it starts making more money.

The plan was originally estimated to cost roughly $23 billion between 2017 and 2030, financed with the help of a streamlining push designed to wring maximum profits out of all of VW’s vehicles. Now, CEO Herbert Diess, who took over from Müller in April, claims that sum won’t be enough.

According to Bloomberg (via Automotive News), Diess told employees via the company’s internal newsletter that, “The burden for our company, such as the cost of bringing to market electric cars, will be higher than expected.”

He added, “This is particularly so since some of our competitors have been making more progress.”

While Diess won’t say what the actual sum might be, he’s not alone in facing greater-than-expected costs in greening his fleet. Mercedes-Benz recently upped the cost estimate for its planned line fo 10 all-electric models. Across its brands, VW Group plans 300 plug-in electric or hybrid vehicles by 2030.

It’s not as though the company isn’t making headway on the profitability front, however. The company’s VW brand saw profitability rise to 4.1 percent last year, up from 1.8 percent in the dismal, scandal-plagued year of 2016. Making peace (and a pact) with its powerful labor union helped a lot, but there’s more efficiencies to be found.

“We need higher profits to finance our future,” Diess said. “Four percent is a minimum, 5 percent to 6 percent allow for some future investments and with 7 percent to 8 percent we’re crisis-ready.” The automaker already stated its hopes to hit a company-wide operating profit of 8 percent of sales by 2025, with the VW brand reaching 6 percent. Currently, the company-wide figure stands at 7.4 percent.

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22 Comments on “Volkswagen Learns That Big Green Promises Are Really Expensive...”

  • avatar

    That is just too bad. I was really looking forward to some more legitimate (i.e. non compliance) EVs.

    However, with the hurricane bearing down on us here in the SE, I don’t know that I’d want to depend on a full EV in potentially life/death situations.

    • 0 avatar
      SCE to AUX

      In the case of Tesla, once again they are temporarily unlocking battery capacity, and freeing up Superchargers.

      No gas lines.

    • 0 avatar

      “However, with the hurricane bearing down on us here in the SE, I don’t know that I’d want to depend on a full EV in potentially life/death situations.”

      — That really depends on the capabilities of the individual BEV, does it not? 200 to 300 miles of range is typically more than enough to get out from under the typical hurricane projected path, assuming you choose the right direction to go.

  • avatar
    SCE to AUX

    I want to know where VW thinks it’s going to source batteries for 100k EVs by 2020.

    It cost Tesla billions of dollars and several years of construction to get the Gigafactory up to speed, and it now has more battery production capacity than all other EV mfrs combined.

    • 0 avatar

      I want to know why anyone would build a huge new battery plant if new and vastly improved battery technologies that will obsolete it are “just around the corner”? I also would like to know why anyone would build a huge new battery plant if the raw materials for current battery production are growing scarce and increasingly expensive?

      • 0 avatar
        SCE to AUX

        Vastly better batteries are always 5 years away.

        As for the expense and scarcity of raw materials, I assume you mean cobalt. TSLA uses less cobalt per battery than most, and their cost per kWh may reach $100 by the end of the year.

  • avatar

    The promise of quiet, pollution free cars is so big that I can imagine a car manufacturer like VW to want to take a little risk. Cities like Beijing and Paris would be so much more beautiful if pollution free, silent vehicles could be used.

    Having said that, I think that in places like the US Midwest, the potential is limited.

    • 0 avatar

      All cities would be much much more beautiful with no cars in them at all though. I think massive parking garages outside the limits and great public transit would do wonders for most cities. Alas planning hasn’t worked like that.

  • avatar

    Hurry up with the Damn bus already before I buy something else.

    • 0 avatar

      Indeed, that is the only VW I see with a high “gotta-have-it” factor (though I’d be very happy to be able to buy their California camper van in the U.S. right now).

    • 0 avatar

      That’s funny, Steve. I said the exact same thing about compact pickup trucks over 4 years ago… I’m buying something else because Hyundai kept stalling and Ford’s only just considering it for the 2022 model year.

  • avatar

    heh, “Crisis ready”. Is there something else VW executives know that the EPA or another environmental group doesn’t know about yet?

  • avatar

    sportyaccordy: Of course, there has already been an issue with gas stations running short, so the ICE advantage there is questionable.

  • avatar

    There is no reason whatsoever for VW to release even a single EV model until technology has progressed to the point where an EV has a range at least as good as an ICE car, has a battery that may be fully charged with the same speed as filling a fuel tank, AND does not have a significant cost penalty over ICE cars in the showroom without taxpayer subsidies. The fact that VW is already guilty of releasing sub-par EVs that never should have seen the light of day, is scandalous enough as it is (not that it is alone in doing so, even an automaker such as Tesla, which specializes in EVs, has never released anything but shoddy products that constitute a waste of money, resources and attention).

    So the natural thing to happen here would be for Diess to retract all VW’s plans to make EVs for the foreseeable future, and then pull all VW’s existing EVs from the market at the same time. All other automakers should also immediately kill their EV lineups (including Tesla, of course), go back to the drawing board, and only release new EVs when they’re able to create EVs that are competitive on the marketplace and deserve to exist. As these are modest and fair suggestions, there’s no reason to think that anyone would have any significant objections (though I’m sure there may be some nutcases on TTAC that have the audacity to object nevertheless).

    • 0 avatar
      SCE to AUX

      “and only release new EVs when they’re able to create EVs that are competitive on the marketplace”

      The Model 3 is currently generating more revenue for its mfr than any other car, so you don’t need to worry about this one any more.

      • 0 avatar

        Wow – I learn so much from you. Tesla – which has never generated a profit in 10+ years of operation is earning more revenue from the M3 than any other car? More than Ford and the F-150 platform? More than GM and the Silverado platform? More than Mercedes does globally from the E-Class platform or VW from the Golf platform? Amazing that you know so much about the model revenues of all the world’s automakers – or did you learn this from one of Elon’s tweets?

        • 0 avatar

          “The Model 3 is currently generating more revenue for its mfr than any other car”

          Did your MBA curriculum cover the difference between revenue versus profit?

        • 0 avatar
          SCE to AUX

          I said “car”, meaning “sedan”.

          July to August:
          1. Tesla Model 3 – $992.5 Million
          2. Toyota Camry – $765.4 Million
          3. Honda Accord – $678.7 Million
          4. Honda Civic – $567.2 Million
          5. Toyota Corolla – $536 Million

          • 0 avatar

            The Model S is the top-selling large luxury car in western Europe:


          • 0 avatar

            The others mentioned are the top most profitable cars in the world. Teslas are among the least profitable cars known to man.

            Insane cash register sales are one thing, but hoopla aside, companies having less money coming in the front door, than going out the back, tend to fail a lot.

          • 0 avatar

            @DM: The money coming in the front door is rapidly catching up to the money going out the back, as you so ‘succinctly’ put it. If this rate continues, it will soon exceed that flow, generating a true positive cash flow and ultimate real profits.

    • 0 avatar

      VW already has an EV, the e-Golf. By all accounts it’s a perfectly good commuter car, not high range but then thousands of commuters don’t need high range. They drive from home to work and back again and charge it up overnight. Certainly a very viable option for many two car households.

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