April 24, 2024

Volkswagen sees electric vehicles as a way to grow in the US

Probably only Americans of a certain age remember when the Volkswagen Beetle was the best-selling imported car in the United States and the hippest ride to a Grateful Dead concert was a Volkswagen Microbus.

Volkswagen is trying to tap into some of that nostalgia in its latest attempt to regain the status and sales numbers it enjoyed in the United States during the heyday of the Beetle and Microbus in the 1960s. But this time it hopes its top models will be electric.

The German automaker ranks second behind Toyota globally, but is a niche player in the United States. Part of the plan to revive its fortunes here is to lean on a new electric model similar to the Microbus, the ID.Buzz, and to revive the Scout brand with a range of electric pick trucks and SUVs.

Last week, as giant earth-movers kicked up clouds of dust, Volkswagen executives and local officials gathered near Columbia, S.C., to dedicate the site of a factory that will build vehicles bearing the Scout emblem for the first time since 1980.

Volkswagen is one of several foreign automakers that see electric cars and the commotion they cause as a way to challenge the dominant players in the United States. Volkswagen, which also owns Audi, Porsche, Bentley and Lamborghini, aims to at least double its market share in the United States by the end of this decade, from a paltry 4 percent now.

“This market is going electric and everyone is starting from scratch,” Volkswagen Chief Financial Officer Arno Antlitz said in an interview. “This is our unique opportunity to grow.”

Electric vehicles have already shaken up the industry rankings, encouraging Volkswagen and other foreign automakers. Battery-powered SUVs and sedans helped Hyundai Motor and sister brand Kia last year overtake Stellantis, the maker of Jeep, Dodge, Chrysler and Ram, as the fourth-largest automaker by sales in the United States.

“Electric vehicles help our brand be seen as a technology leader,” said José Muñoz, Hyundai’s Chief Operating Officer. They also attract a better-educated, more affluent customer than has been the case for the South Korean company’s gasoline vehicles, he said in an interview.

The list of companies dominating electric car sales looks very different from the top spots for overall U.S. sales, hinting at a future where a different group of companies rule the roost.

The top five companies in the United States for all engine types are General Motors, Toyota, Ford Motor, Hyundai and Stellantis. In the field of electric cars, Tesla is number 1 by a wide margin, followed by Hyundai, GM, Ford and Volkswagen. Toyota is a small player in the field of electric cars.

“Just because you’ve been around for 120 years doesn’t mean you’ll have anything in this new market,” said Steven Center, Kia America’s chief operating officer.

Volvo Cars is another company hoping to benefit from the changes electric vehicles bring. The Swedish automaker, majority owned by Geely Holding Group of China, reported a 26 percent increase in U.S. sales last year.

Much of that growth came from hybrids that have a gasoline engine and can travel shorter distances on batteries. But Mike Cottone, president of Volvo Cars for the United States and Canada, said he sees hybrids as a path to fully electric vehicles.

Later this year, Volvo will begin selling a Chinese-made, all-electric compact SUV, the EX30, which starts at $35,000. The company will also begin shipping the EX90, a seven-seat SUV made in South Carolina that will cost around $80,000.

Especially for luxury car buyers, Mr Cottone said, “there is a lot of room for growth in the EV segment in the coming years.”

Volkswagen has tried and failed to establish a larger presence in the United States since the 1970s, and analysts are skeptical that this time will be any different. “I’ve seen Volkswagen set these goals before,” said Michelle Krebs, executive analyst at Cox Automotive.

The established car manufacturers will not be pushovers. GM and Ford are also investing heavily in electric vehicles, while Toyota has said it will produce a large electric SUV in Kentucky next year.

Ms. Krebs points out that U.S. auto sales are growing slowly, making the battle for market share largely a zero-sum game. “There’s a little bit of growth that everyone is striving for,” she said.

Volkswagen’s last major effort in the United States ended in scandal. In the early 2000s, the company tried to sell Americans cars with “clean diesel” engines. It promoted the fuel, which was used far more in European passenger cars than American cars, as more environmentally friendly than gasoline.

But the campaign failed in 2015 when U.S. regulators discovered that Volkswagen had used software in its vehicles to cheat on emissions tests. In reality, cars polluted as much as long-distance trucks.

The scandal had one benefit for Volkswagen. It prompted the company to invest early in electric vehicle technology, building cars designed from the ground up to run on batteries, rather than making cumbersome modifications to gasoline models. In Europe, Volkswagen’s various electric brands together sell better than Tesla, according to Schmidt Automotive Research.

The person responsible for doubling Volkswagen sales in the United States is Pablo Di Si, president of Volkswagen Group of America. Mr Di Si, originally from Argentina, said he planned to use the same strategy as when he oversaw the company’s operations in Brazil, where Volkswagen’s market share rose from 9 percent to more than 16 percent.

“You look at the segments that you think will be successful in 10 years,” Mr. Di Si said in an interview. “What are your gaps in the product portfolio? And then you start adding products for those specific markets.”

In the United States, he said, that will likely include gasoline cars and hybrids as well as fully electric vehicles. Volkswagen plans to import the ID.7, an electric sedan, and the ID.Buzz. Mr Di Si hinted that there may also be a new electric vehicle that references the Beetle’s design. The last version of that car sold in the United States was the 2019 Beetle.

Volkswagen is building a $5 billion factory in Ontario to supply batteries to its factories in Chattanooga, Tennessee, and Puebla, Mexico, which together will produce at least 80 percent of the company’s cars sold in North America. That will help buyers of cars from Volkswagen, Audi and other brands qualify for federal tax credits of up to $7,500 per car.

Scout will fill a major gap in Volkswagen’s portfolio: pickups, one of the most popular vehicles in the United States. By reviving Scout, one of the first passenger cars that could drive on rough dirt roads as well as city streets, Volkswagen hopes to attract buyers who typically buy off-road vehicles from American brands such as Chevrolet, Ford and Jeep.

The South Carolina factory will underline the made-in-America atmosphere when the first Scouts go on sale at the end of 2026. Volkswagen inherited the Scout brand when the company’s truck subsidiary, Traton, acquired Navistar, an American company formerly known as International Harvester. 2021.

The new Scouts may borrow some parts used in other Volkswagen vehicles, company executives said, but the design will differ from existing vehicles such as the electric ID.4 SUV made in Chattanooga. Scout plans to unveil prototypes this year.

A stronger presence in the United States is “a strategic imperative,” Scott Keogh, the CEO of Volkswagen’s Scout Motors division, said in South Carolina last week.

Outside the United States, Volkswagen is a colossus, with a 26 percent share of the European market and 15 percent in China. But the company is under intense pressure in China, where sales of electric vehicles have grown rapidly, helping BYD and other Chinese automakers gain market share from foreign automakers. To compensate, Volkswagen needs growth in the United States.

Volkswagen “wants to have a strong global footprint,” Mr. Keogh said, “not an isolated footprint, where it is only strong in one region.”

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