VW’s sales chief focused on residuals, other challenges once EV makes inroads

Volkswagen’s Christian Dahlheim is one of the few remaining executives to occupy an important VW Group role after CEO Herbert Diess flattened hierarchies and shifted responsibility from the group toward the brands. The former sales chief of VW’s captive financial services division now is a kind of referee, coordinating the various go-to-market strategies to prevent cannibalization and boost profits. Automotive News Europe Correspondent Christiaan Hetzner spoke with Dahlheim about the VW Group’s ambitious plans for electric vehicles.

When prebooking began for ID3 in May it took only a day for the first 10,000 reservations to be collected. The second 10,000 required a month, and it was not until the car debuted in September that you hit your target of 30,000. Can we expect sales to tail off similarly after the first wave of demand is satisfied?
You tend to see this sort of steep ramp-up in demand from early adopters, so the question is how long before a new technology finds broader mass-market acceptance. With the ID3, we have addressed two of the three main obstacles to electromobility: range and affordability, with infrastructure being the third obstacle. Don’t forget, fleet customers need EVs to meet their own CO2 sustainability targets. We expect roughly half of the ID3s will be taken by fleet customers.

These customers focus on total cost of ownership. Is this an argument that can also work with your average car buyer?
Private customers usually don’t think in terms of what a kilometer costs them in cents nor whether it makes more sense to take the subways instead of the car based on prevailing fuel prices. That, however, will change with EVs when people start to see how much less it costs to charge their vehicle at home versus filling up their tank at the fuel station — for example in countries such as France where electricity is cheaper.

Even after an EV has exceeded its useful life, it still has a valuable asset: the battery. What does that mean for residual values?
This is an important topic. With the share of leases expected to roughly double to more than 70 percent for battery-electric vehicles, a lot of these cars will end up being returned to us such that we have to sell them back into the market. Therefore, we calculate and budget necessary resources for the remarketing of EVs when they are sold. I believe we can achieve structurally higher residual values with an EV compared with a combustion car.

Why?
Roughly 4 percent of all VW Group worldwide sales next year will be EVs. When this first wave of off-lease cars are sold as used cars in three years, we expect battery-electric vehicles as a share of our overall business to have risen to roughly a tenth of volume. By extension, that means these vehicles will be entering a market where we foresee rising demand combined with a relatively low supply.

How does this impact VW’s profitability?
The better we can control that process, the higher our residual values are, the lower the incentives are and the lower our overall distribution costs are. We believe optimizing the latter will deliver a significant contribution toward reaching our margin targets.