VW sticks to electric course despite headwinds - decision on 20,000-euro model soon

Europe's largest car manufacturer Volkswagen is sticking to its electric course despite the current slump in electric vehicles. "We stand by our strategy and clearly see the future in electromobility," said CEO Oliver Blume on Wednesday during the presentation of the group's 2023 balance sheet in Berlin. "I don't believe in questioning everything at the first sign of headwinds." Given the current reluctance to buy, especially in Germany, 2024 will be a "challenging year" for the group, Blume admitted. Nevertheless, he is confident that demand will pick up again in the coming months and that Volkswagen will be able to at least slightly increase its overall annual sales. According to the business report's outlook, sales are expected to rise by three percent compared to 2023.

The largest model offensive in the company's history

This will be primarily supported by numerous models that the group's brands will launch this year. "We are starting the largest model offensive in the company's history," said Blume. "More than 30 models will be launched in 2024." Among them is the facelift of the Golf, which will once again be available as an internal combustion engine, and the long-overdue electric hopefuls Macan Electric from Porsche and Q6 e-tron from Audi. Both were supposed to start two years ago but were repeatedly delayed due to software issues. Blume called for more support for electromobility from politicians.

"We need a clear commitment from politicians," he said.

Above all, the industry needs planning security. He sharply criticized the surprise removal of the purchase premium for electric vehicles in Germany at the end of 2023. Demand plummeted afterwards, and VW had to reduce production and cut shifts at its electric vehicle plants in Zwickau and Emden. However, Blume is not worried about the locations. With new models, demand for electric vehicles will rise again, he said.

Combustion Engines Lift Profitability but Threaten Fleet Emission Limits

The weak demand for electric cars is also ambivalent because, at the same time, the higher-margin combustion engines are experiencing an upswing, which in turn increases the profitability of the group. However, the joy over this and the ramp-ups of the popular SUV Tiguan, as well as the Passat and Golf, is likely to be tempered because VW must simultaneously increase the quota of electric cars in order to comply with the EU fleet emission limits for 2025, non-compliance with which would result in massive fines. Additionally, underutilized factories, such as those in Zwickau and Emden, are naturally a problem that one tries to counter with high discounts - which in turn squeeze the already moderate margin.

Decision on 20,000-Euro Electric Car to be Made by End of 2024

In the medium term, the group is placing great hope on the entry-level electric car ID.2all announced for 2026 for under 25,000 euros, and a possibly even cheaper model ID.1 for 20,000 euros. The company intends to make a decision on the project by the end of the year, stated Blume. A cooperation with another car manufacturer is not excluded. Recently, the "Handelsblatt" reported on talks with Renault. According to "Automobilwoche", the small electric car is aimed for a launch in 2027.

Cariad & China: Problem Division and Problem Market

Regarding the problem division of software at the subsidiary Cariad, which also delayed the introduction of the important models Porsche Macan and Audi Q6 e-tron by two years, the new CEO Peter Bosch must address the issues and push forward the restructuring. Meanwhile, a loss of 2.4 billion euros has been recorded here. And in VW’s former leading market China, the company has fallen behind the Far East rival BYD and now only claims the title of "largest international manufacturer." Despite slightly increased sales in 2023, the operating result fell from 3.3 to 2.6 billion euros, following a 20 percent drop in 2022. There is also hope here from cooperation with the software-savvy start-up Xpeng.