Volkswagen Group's product strategy head, Michael Jost, is the architect and visionary behind the automaker's unprecedented rollout of electric vehicles. One of his biggest accomplishments was convincing German trade unionists in Emden, the longtime production home of the Passat midsize car, to agree to a risky transformation that will make it the third VW plant in Germany to switch entirely to making members of the brand's ID family. Jost spoke about this and more with Automotive News Europe Correspondent Christiaan Hetzner.
Could you outline the VW Group's decarbonization strategy?
We want to reduce the global CO2 footprint of Volkswagen Group passenger cars to net zero by 2050. That means we need to produce the last combustion engine car around 2040, although there could still be some markets where we might have to sell a small number of cars with combustion engines, maybe in the lower single-digit percentage range. If you count backward, that means the last combustion engine car has an SOP [start of production] around 2033. If you assume that is the second generation on a platform, then this platform has its SOP in or around 2026. Given the long development lead times, you can say that our engineers are already working today on our final combustion engine architecture.
In the immediate future, VW Group needs to comply with new EU emissions reduction targets starting next year. Analyst PA Consulting estimates the group may have to pay up to 1.4 billion euros in fines for missing its mandatory target. Is this true?
Next year and 2021 might be challenging since we will be ramping up our EV models. We will work hard to be CO2 compliant and we are pretty sure we will reach all the goals set for the passenger cars. By 2022, the situation will be quite relaxed. We also don't foresee any problems in the subsequent years.
What about when the CO2 target gets lowered again and Euro 7 rules come into effect?
By 2024 we will have the next wave of combustion engine and e-models, including an entry-level MEB car about the size of a VW T-Cross capable of going 200 km to 250 km on one charge and priced below 20,000 euros. At that point we think society's shift toward electromobility will largely be complete and we will not need to push these volumes.
How will these MEB entry-level cars differ from today to reach that price?
One possible option could be the use of lithium iron phosphate battery cells instead of nickel manganese cobalt.
Will EVs dilute your margins?
Naturally, we don't expect to immediately earn as much money with EVs as we do with a technology that we have perfected over decades. In the midterm, however, we expect that the enormous scale effects will help us achieve similar profitability with a battery-powered car as with an internal combustion engine car with some basic level of hybridization. That means we would have no further economic incentive to sell combustion cars over EVs. As far as the customer goes, we have already reached price parity with an ID3 that costs the same as an equivalent Golf diesel.
Will VW artificially limit EV volumes to protect profitability during the transformation phase?
We do not see EVs as enablers that help us to continue selling our combustion cars. There was this notion that we only needed a certain number of electric cars to make our combustion engine car fleet compliant, because that's where we make our money. But that would mean we would block our own transformation and never achieve the necessary profitability with electromobility.
If that is the case, why is VW only targeting 74 grams of CO2 per kilometer under WLTP by 2030? That doesn't sound as ambitious as your electrification rollout strategy.
That's our compliance target, but I can assure you that our business model is much more ambitious. We expect to amass CO2 credits that in today's terms would be worth billions of euros.
Could you sell your CO2 credits as Tesla already does?
By that point, we expect we won't be the only ones moving in this direction, since there is no alternative to electromobility. I anticipate there won't be any material demand from our competitors for all these CO2 credits at that point. But if there was, we could offer them.
VW brand EV boss Thomas Ulbrich expects there will be 33 MEB-based models across four of the group's brands by mid-2023. What else might we see in the future?
There is the ID Space Vizzion we just showed in Los Angeles last month. Besides that, we have decided what the next wave could look like, but we will wait and see how the current crop of EVs perform before making a decision in mid-2020 whether to release the funds for their development. So far, the ID3 already has 37,000 pre-bookings, and this excludes fleets. About 80 percent of those customers are new to the brand. We expect that once you drive an EV, you won't have any interest in going back to a combustion engine car.