VW Group: Our Electric Car Investment Is One-Third Of Total

FEB 4 2019 BY BRADLEY BERMAN 56

Statement comes from VW’s financial parent company, but you get the idea.

The company entity known as Porsche SE is not a carmaker. It’s the financial holding company that owns the Volkswagen Group and all its brands, including Audi and Porsche. So it matters a lot what Porsche SE thinks about electrification.

Fortunately, Philipp von Hagen – executive board member of Porsche SE – was on hand at today’s BloombergNEF San Francisco Summit to share his take on EVs. Von Hagen was asked if Porsche SE (and therefore VW) is “all in” on electrification? He replied, “Not really.”

Yes, Volkswagen has committed to $50 billion in electric cars, autonomous driving, and mobility services by 2024. But what von Hagen revealed – and I have not heard before – is what the $50 billion figure represents. It’s only one-third of the company’s investment powertrain technologies in the next five years. He said, “The investment is big and consequential, but we still are making two-thirds of our investment in existing drivetrain technologies.”

That’s fascinating. We hear all the time about the number of billions of dollars that one company or another is making in electrification, but automakers are always investing significant sums in technology. You almost never hear what percentage of the investment is going to EVs and other emerging technologies.

You also hear about the number of models that are going electric. Von Hagen said that we could see 50 EVs from Porsche SE and its brands by the end of 2030. But keep in mind that the company makes 300 models, according to von Hagen.

When asked about the risks that VW faces in making its investment in electrification, he put the onus on consumers. “I’m a great believer in how electrification improves the vehicles offered to consumers,” he said. “But will people buy electric vehicles?”

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56 Comments on "VW Group: Our Electric Car Investment Is One-Third Of Total"

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Though not all investments pay off. Such as investing in a technology that cheats existing pollution tests, and then being found out. That will cost VW too to the tune of around $20 billion after all is said and done.
So hopefully the continued investments in antiquated drive train solutions, not bev, will not cost them as much in the future and will be directed at actual improvements rather than attempts to hornswoggle the regulations.
I have a 1/3 belief that that will happen.

I suspect that this figure, $150B is total investment not just drivetrain technologies as the article says. The transition to EVs will be slower than most who make comments on this website seem to think. Drag strip performance of certain Tesla models notwithstanding, no electric vehicle, regardless of cost, offers the utility of a significantly cheaper petro-mobile. Certainly EVs are superior in some ways (most important: less CO2 than a comparable mass/power petro-mobile) but exaggerated claims of their utility are naive at best.

Electric vehicles will eventually displace all ice, as they are far superior in efficiency, longevity, and reduced maintenance. Your argument is specious and lacks analysis. The claims of this superiority are hardly exaggerated and are being proven over and over again everyday, that evs are far superior, to the ice, which is 20th century technology being replaced by a better one. 95% efficiency as opposed to 25%, at best.
The very presence of people such as yourself is an indication of the worry and trepidation that is taking hold of legacy auto, plagued with declining sales, closing plants and lost jobs, so while evs go from strength to strength, and nothing can stop it, the ice is at the end of its life and nothing can stop that either.
least we forget, the ongoing story:
https://finance.yahoo.com/news/u-judge-lets-most-emissions-claims-against-daimler-224714963–finance.html

Electric vehicles will never displace all ICE, but they will probably displace most ICE. Just as today there will be a multitude of drivetrains in the future. ICE may be a minor one, or alternatively another technology may replace those that aren’t electric. Today (and for the last 30 years) there have been at least half a dozen different power sources for vehicles, that’s unlikely to change because there are pluses and minuses for most technology.

It’s less about worry and trepidation, more about reality. To make the assertion that EV’s are better in every way than ICE is a blinkered view in itself, and shows that your comments are not grounded in reality.

Andy – quote: “Electric vehicles will never displace all ICE, but they will probably displace most ICE.” ——————- And a mistake i think a lot of people make is that it will happen uniformly all over the world, all at the same time…… It won’t. I do believe the future lies increasingly with battery electric, but it’s not going to happen overnight. Just how fast will depend on many factors – quite a number of cities are now announcing hard limits on what vehicles will be allowed in a few years time. As one example, London has stated that only ZEVs will be allowed into quite a large percentage of the city from 2025. Said one way, 6 years seems quite a long time – but if you’re buying a new car now it takes on a very different perspective………. Then again, there are subsidies/taxes or any other form of financial inducements to influence buying choices – would BEVs be selling so well in Norway if such didn’t exist there? And this before even thinking about technological improvements – cheaper, lighter batteries, capable of being charged more rapidly. It’s a mistake made by both BEV lovers and loathers to think… Read more »

BS, on TCO basis EVs are already competitive with ICE in the segments they are made in. With solar pv they are actually cheaper.

And that is with the existing battery tech which is getting better and cheaper all the time as it scales.

And it is only a matter of time until their are big battery breakthrough(s) to blow it wide open.

All depends where you live and what you do. There are no absolutes, stop pretending there are.

For a lot of people Solar never pays back for example. And the TCO depends very much on vehicle usage. Sure, there are situations where EV’s make their money back over a period of time (the prime one being a Tesla vs an equivalent BMW/Audi/MB), but there are also plenty of situations where they don’t – that’s one of the reasons there are major subsidies for EV’s in many countries, to try and reduce that disparity.

As time goes on the number of situations where EV’s pay back will increase, but currently for most people it’s just not the case.

The only advantage that ICE have today is cost and speed of fuel refill. All other areas I can think of BEVs are superior. Once more BEVs are produced price will come down. Lets not forget that today gas station have super slim margins on the sale of gas. Once less ICE are on the road how many are going to go under? Once that starts to happen how hard will it be to own an ICE? I can fuel at home. An ICE owner will never get that option.

True but cost us an important factor, especially if you don’t drive a little if miles the payback from fuel savings takes a long time .

This is one of the issues with the TCO argument. For many vehicles the only way it really works is if the owner drives more than average each year and if they own their car for 10+ years. Neither is something the majority of people do.

I don’t understand why this comment has so many negative thumbs. The comment is relevant and factual. We don’t want this forum to be an echo chamber??

Because nobody agrees with the TCO argument he’s making. Including me. I also happen to think that the performance on the iPace is pretty solid. Besides, the Mission E is no slouch. Sure, Tesla stomps over all in a performance run, but broad strokes, any performance BEVs will slam their ICE counterparts. Will the companies lose their shirts transitioning? I think a few will. I hope a few won’t even try and history has some automotive gravestones to reflect upon.

Well said Dan

The utility is so clearly superior that DHL (a freakin delivery company!) took matters into their own hands and started developing their own EV trucks since the market has failed to meet this demand.

Not quite. While your general argument holds, DHL bought a startup called StreetScooter that was already in the advanced development of an LCV (light commercial vehicle, or compact van).

I have to agree with Dan…unfortunately. The Kona electric in Alberta, Canada, is quite precisely 3 times (yes, really, 3 times!!!) more expensive to lease than the equivalent gas version of the very same model. It will take some time before TCO will be anywhere close here in Alberta with no incentives and no interest by companies to sell electric cars.

Yep, very few of us actually buy Electric vehicles on a percentage basis

It depends on what segment you purchase in. True if you buy a truck, not so true if you purchase a luxury vehicle in the U.S. where the Tesla Model 3 beat all comers except for Mercedes.
Also geographic location matters, like the developing world where hardly any evs exist, to Norway where over 50% of new car sales are plug-ins and mostly bevs.
It’s an old lame argument. What is not arguable is that evs are the future and gas is the past.

You have to leave Norway and California out of the numbers because they are statistical outliers. They are great for sales numbers but they don’t represent the overall sales trend in the market.

OK then add central NJ to your outliers. The amount of Teslas in the area if growing so fast it is unreal.

I don’t see why you would leave California out. If I remember correctly, it constitutes the 7th largest economy in the world so it demonstrates what the effect of pro-EV legislation could do to the mix of EV and ICE cars. I think it is a safe bet that more and more countries will start to adopt similar policies as voters start to put more emphasis on climate changes.

Tesla outsells Porsche, Ferrari, and Jaguar combined in Minnesota, and that was before the Model III. They used to deliver one truckload a week, now it is two truckloads multiple times a week.

What about the present?

So far.

Yes, so far…
But some weird subset of customers is hardly something you bet your entire company on… one third is is quite a bit. And it’s still more than any other carmaker invests.

1/3 “in”

… is 2/3 out.

VW is one of the largest R&D spenders in the world, spending 1/3rd of their powertrain budget is a ton of money. They regularly have to spend a lot of money to refresh those, so I am sure it eats into that budget.

Viking79 said: “VW is one of the largest R&D spenders in the world, spending 1/3rd of their powertrain budget is a ton of money…”
————-

Also true…

As the article points out, the 1/3 is for “electric cars, autonomous driving, and mobility services”… so that 1/3 includes other things than development of EV models. Autonomous driving is very resource intensive and will likely take a big bite out of that 1/3. Also per VW a large part of that budget will be dedicated towards hybrid EV models.

So the amount of the development budget dedicated towards all-electric models is significantly less than 1/3… perhaps something like 1/6.

Yes 1/6 of VW’s development budget dedicated toward all-electric models is a large dollar amount given VW’s.

Also true, organizational attention & priority *always* follows the money. VW will not be able to compete against an all-electric Tesla in the EV space if VWs future development organizational resources is 15% dedicated towards all-electric.

To be fair, once you have a good design for a basic motor and power electronics, and are relying on others for the batteries, there isn’t much left to do. EV drivetrains are pretty much as good as they’ll ever be, the only serious improvements left to work on are the batteries.

@ab said: “…once you have a good design for a basic motor and power electronics, and are relying on others for the batteries, there isn’t much left to do. EV drivetrains are pretty much as good as they’ll ever be…”
————————-

Opposite that is real world.

They are already 90+% efficient. Once you get the power you need inside of well engineered package, you’re pretty much done. Whereas with gas engines there is always lots of tweaking to be done, increasing strictness of emissions and fuel economy ratings, noise reduction, balance of power/efficiency, reliability issues, etc.

@ab said: “…Once you get the power you need inside of well engineered [EV] package, you’re pretty much done…”
————-

It’s never “done”

There is always opportunity to improve every aspect of a “well engineered package” be it EV or ICE.

Likely an EV competitor is hard at work figuring out what the next better iteration will be. Tesla for example is applying continuous weekly improvements (sometimes small, sometimes big) on all its cars… they are never “done”.

While he did not say it he seems to think EV charging will be a mess, slowing adoption – part of “will people buy electric vehicles”. Given our progress with multiple charging plugs and gas station pay methods, he is right.

If VW is going to throw money away like that, I’d be willing to drive to Tennessee with a couple of empty trash bags they could fill with $100 bills, just to help them out.

I am curious what you think they are doing that is “throwing money away” if you could explain.

Continuing to spend 2rds of their investment budget on dead end technology.

That dead end technology is going to be around at least for 10 years or 20. Earth is a big planet. It makes sense for them to invest in next generation ICEs, even if that is the last generation to be sold.

…to which the answer is yes, we may well buy them, if they’d stop wasting time on PR and actually get one onto my driveway.

I can’t wait for the ID Crozz, comes down to that or Model Y for me after end of next year. Will depend on features/value…

I second that. 🙂

That sounds more like the penalty for the dieselgate fiasco which required them to make restitution in the form of clean renewable energy cars as part of the fine.
I hope their electric vehicles are a screaming success which will make them true believers rather than forced compliance.

You seem to forget that total failure followed by bankruptcy is also an option.

Emission restrictions are the clue here. Every few years sold fleet emissions allowed decreases. That means that Car makers can only do three things: A) Sell less powerful cars (on average). B) Reduce emissions of their engines if possible (think Hybrid here), C) Sell 20% of their fleet pure electric. A is not an option for VW, B neither (dieselgate shows they were on their limit). C is the only option for VW. On the contrary Toyota inversion in hybrid technology makes B the easier path for them. A dangerous path if EV’s are the future, but that is yet to be proven by history.

“Investments” or court settlements and fines?

Good one.

VW, nobody cares about your EV investment promises until your electric car PRODUCTION is one third of total

I care. You lied.

If you care about another fake promice of VW you are not very smart.

Most people care about EV’s, not companies. Its not football.

Theres also the realisation that electrification isnt going to happen overnight, no matter what some zealots believe. Itll be incremental changes over a couple of decades as technology improves, prices come down, demand is established and models are available. All take time, you cant just switch over everything in a year or two, and even if you could, for a company like VW it wont be possible with todays technology.

VW Group has jump from virtually zero investment in EV to 30% in only 6 monthes. That is huge if you count it by car sold. It makes sense they invest in ICEs now, while they are not certain of what the future will take once they start mass delivering of cars. They may find EV market is not yet so mature in 2022, so their ICE inversion will pay off. On the contrary, they can find their ICEs pile up once people has access to EVs. Then ICE inversion will make sense also, as long as they have funded next generation ICEs and they will be able to focus 100% in EVs.

VW estimates that they are going to sell 3 million EVs by 2025 or 25% of total sales (12 million cars per year expected by then). Given that the profit margin on EVs will be lower than on ICE cars this means they will probably generate 80-90% of their total profits by selling ICE cars in 2025.

Not investing money in what will generate almost all of the profits would be a terrible business decission.

Wow!! Some very revealing comments by a person at the top of the organization. As they say, a fish rots from the head down.

“I’m a great believer in how electrification improves the vehicles offered to consumers,” he said. “But will people buy electric vehicles?”

No mention of the environment or obligation to move away from petrol or diesel! No sense that VW is obligated to do anything even though they were tried and convicted as emission frauds.

You really get a sense of what’s really going on. Porsche SE is investing heavily in electrification but to burn two thirds of your investment budget on a technology that has crucified the company and will be dead in ten years anyway is unbelievably stupid. Can you imagine the charging infrastructure that could be built with even a fraction of this budget!?

Porsche SE deserve to go down, the really do.

So not enough people buying them shouldn’t be a concern for a business? So if they went “all in” and went out of business thats better for the company?

The big question in my mind is, are people that short sighted, or do people just want established manufacturers to crash and burn, so someone like Tesla can take over and gain essentially a monopoly on future car sales? Not that the latter will ever happen as they wouldnt be able to make enough cars, or models.

I understand why the board member was trying to put the EV investment into perspective.
But still, VW is putting a whole third of its powertrain investment into EV, that’s massive.
Despite the constant press releases of nothingness and everyone’s understandable mistrust of VW, I can only conclude that VW are properly serious about EV now.

James – “But still, VW is putting a whole third of its powertrain investment into EV, that’s massive.”
———————
You said it! Would anyone have thought that only a couple of years back? So anyone like to predict what the big companies will be doing in say, 5 years time?