Welcome to the new weekly series -- Electric Car Watch. We will talk about EV plans of major car brands, take a look at their EV vision, and go over their technology platforms. We will also discuss the EV models in production and look at what we can expect for India. In this week’s episode we will talk about Volkswagen’s dramatic shift and rapid acceleration towards an electric car future.
Volkswagen's 'NEW AUTO' vision
Volkswagen(VW) was known for their Dieselgate scandal. They had an anti-EV stance and were ‘supporting’ Hydrogen cars until a few years ago. Now all that has changed. All research on Hydrogen has been stopped, and Volkswagen is committed to EVs. The person driving this change is CEO Herbert Diess, who wants electric cars to make up half of the Volkswagen Group's sales in 2030, and wants 100% of sales in major markets to be zero-emission by 2040. To do this, Volkswagen has unveiled its plans for a massive expansion in battery production. They will build six ‘gigafactories’ in Europe by 2030 with a total production capacity of 240-gigawatt hours per year. That's enough to power almost 4 million Volkswagen ID.3 electric vehicles. Earlier this year, Volkswagen announced a new electric car strategy through 2030, called ‘NEW AUTO’, with a focus on electric cars, ride-sharing, autonomy, and robo taxis.
Personally, I think Herbert Diess is an intelligent guy. He speaks positively about Tesla even though they are a huge competitor. What I like about him is that he sees a market for all kinds of consumers in which everyone can co-exist unlike some CEOs who see the world through only a competitive lens. He is the right man to transform the company. Mr. Diess says the ICE market will decline by 20% by 2030, and the global EV market will be on par with ICE sales. Also, VW will become more profitable by selling EV's as they are aiming for control of battery raw materials, secondary use, and full recycling. Essentially, VW will be part of the battery circular economy. What I like about VW is that they are focusing on vertical integration just like BYD and Tesla, right from cell manufacturing to recycling. This will enable them to be more profitable compared to other carmakers.
I wanted to talk about VW’s one single super EV platform that will be used by the entire group. Currently, VW uses two platforms for their electric cars – the modular electric drive matrix (MEB) and the Premium Platform Electric (PPE). The ID.3 and ID.4 electric cars use the MEB platform. The next generation of all-electric cars will be developed on a standardised platform. This platform is called the Scalable Systems Platform (SSP). It will consist of various modules like a battery system, autonomous driving, and an EV Powertrain and will be scalable for vehicles from 85 to 850 kW. Thus, the SSP platform can be used in small city cars as well as in supercars focused on performance.
VW has announced a Research & Development facility in Wolfsburg to develop the core of the SSP platform and its modules. By 2026, Volkswagen Group's electric cars will be based on the SSP platform. But we also feel electric cars from other OEMs will use this platform as VW can licence it to them. We expect more than 40 million VW EVs to share this architecture by 2030.
Regarding battery packs, VW has also announced a unified cell concept. This cell will be a prismatic cell that can contain various chemisties. They can be LFP cells, NMC cells, and high nickel cells. This cell can also adapt to solid state cells whenever those enter production. VW has invested in a California-based startup called QuantumScape, which will develop these solid state cells. The first solid state battery cells will enter production around 2024. VW expects solid-state cells to be available in 2025. The technology will help VW achieve its goal of recharging a battery of 77 kWh capacity – such as that in today’s ID.4 – to 80% capacity in 12 minutes.
These unified cells will be manufactured in 6 gigafactories. To accelerate this process, Volkswagen Group announced a partnership with Gotion High-Tech Co., Ltd., one of the big 3 Chinese cell and battery manufacturers.
It really is interesting to note that VW has decided not to use cylindrical or pouch cells. VW now sees the cells inside the battery pack—not just the pack itself—as a core competency. The main goal is to cut battery costs by as much as half and go below the magic $100 per kilowatt-hour (kWh) mark. Also, I like that the cell is chemistry agnostic. Thus we will see inexpensive electric car models based on a lithium iron-phosphate design, whereas the “high-volume” cars will use cells with high manganese content. Performance or long-range models will have cells with high nickel content. More nickel means higher range and performance. All of this planning and cell manufacturing control will give VW a huge edge in the coming decade.
Another area I want to touch base on is VW’s huge investment in software. VW has created a dedicated automotive software company called Cardiad (short for ‘Car, I am digital’). They are developing an automotive software stack and an operating system called VW.OS, which will be installed for all of the group’s brands, including VW, Audi and Skoda. Cardiad software platform 1.1 can be found today in VW ID3, VW ID4, and Audi Q4 eTron. They have already created a seamless OTA software update framework. They plan to deliver OTA updates every 3 months for their customers. In 2023, Cardiad will be ready with the 1.2 version, which will be based on Android Auto with a 3rd party app store. By 2025, v2.0 will be ready, which will include VW OS and will be installed in all VW group cars. This will also be autonomy level 4 ready. By 2030, upto 40 million vehicles will be running the Cardiad software stack.
Now, software expertise is very important for companies thinking about EVs. No OEM has the software expertise Tesla has, and VW, to their credit, is showing us how to build solid software capability. You need to think in terms of 5 to 10 years. VW has shown they are dead serious about offering a real EV experience with software at its core. This seems like a transformation of VW from an auto OEM into more of a tech company.
What’s in it for India?
Herbert Diess clearly mentioned that the company’s EV plans are majorly for the US, EU, and Chinese markets. India may not be a part of these EV plans because VW will attempt to push ICE vehicles in our market. However, VW India suits have said that they expect to import limited numbers of ID.3 or ID.4 electric cars by 2022 or 2023 to “test” the Indian market. Honestly, I believe we can only expect VW India to get serious about EV's for India only after 2026.
Can Volkswagen be a global EV player?
The VW group is a huge group with brands like VW, Audi, Skoda, and Porsche. By 2030, can the VW group become one of the world's largest EV manufacturers? Maybe. They have a solid EV vision to build a foundation on. But once the Giga factory in Berlin opens up, VW will face huge competition from Tesla with Tesla cars becoming 20-30% cheaper in Europe.
Nevertheless, I’m very impressed by VW’s vision towards EVs. The investments in platforms, hardware, software, battery cell supply, and vertical integration strategies are amazing. We have not seen any single BIG ICE automaker show such a comprehensive vision when it comes to phasing out ICE and going all in for electrics.
There are some lessons here for Indian car manufacturers. I’m yet to see an EV vision/master plan from any Indian automaker. Tata Motors comes the closest with their Tata UniEVerse. But they have provided no details in terms of timelines, cell manufacturing scale, software investments, and vertical integration. Tata really needs to up their game instead of launching one retrofit after another if they want to be a serious player in the EV industry globally.
I think VW will be one of the BIG 3 electric car makers in the world along with Tesla and BYD. But unlike Tesla and BYD, VW is transitioning from ICE vehicles to EV's and will remain cautious during the transition. BYD and TESLA, however, are fully focused on EV's and that will give them an edge.
Do write in the comments below on your observation and the research you may have done on VW’s EV strategy.