Volkswagen beats Tesla to the Punch and Unveils an Affordable Electric Vehicle
March 22, 2023
Volkswagen is about to do what Tesla failed to do throughout Investor Day: demonstrate affordable electric transportation for consumers. The German automaker plans to showcase a model that will start at less than 25,000 euros ($26,600). That is why it has used the hashtag #VWforthepeople to promote the event to be held on Wednesday, March 15, in Hamburg.
EV blogs and enthusiast publications are hoping to get their first look at a compact hatchback that will start shipping in a few years. VW urgently requires a successful car for the electric age. The company has struggled to keep up with Tesla’s electric vehicles. It therefore needs to stop declining sales in China, where domestic manufacturers, led by BYD, have stepped up their game.
An electric model that comes even remotely close to the triumph of the Golf (VW has produced well over 35 million units) would do wonders for the brand. The event adds to what has already been a busy week for the largest car manufacturer on the European continent.
On Monday, Volkswagen unveiled the planes for its first out-of-home battery plant. It is not yet clear how much the company will invest in the plant in St. Thomas, Ontario. However, the Canadian Industry Minister said it will be the largest automotive investment in the country’s history. On Tuesday, the company increased the cost of the five-year project by 13 percent. Bringing it to 180 billion euros ($193.39 billion), more than two-thirds of which will be for the program and electric vehicles.
“This will be a decisive year for delivering strategic ends and accelerating growth across the group”
Chief executive Oliver Blume said.
For all of Tesla’s dominance in the early days of electric vehicles, Elon Musk has left a window of possibility open for incumbents looking to catch up. The company last launched a new passenger vehicle in 2020. Model Y, and has made only minor cosmetic changes to the Model 3 since it went into production nearly 6 years ago. The sedan would be made only at the $35,000 cost promised by its CEO. Who suggested that Tesla has been working hard to get a $25,000 model to be unveiled for the first time in 2020. Building an electric car for the masses seems like a no-brainer. But until now it’s been the white whale of the industry.
Manufacturers have not found a way to introduce affordable electric models in China. Apart from the short-range mini models they are unlikely to be able to establish themselves in other markets. This is because of still stubbornly expensive batteries and still subjectively small electric vehicle production numbers. Volkswagen has been excluded from the mini segment in China and has paid the price in terms of market share.
China’s middle class continues to drive predominantly gasoline customers. While the upper and lower segments of the world’s largest car market remain increasingly electrified. The company has excelled in these segments with its combustion models and cannot afford to lose these consumers as they move toward plug-in cars.
Volkswagen has become a global great thanks to the Beetle, the 2-door that sold well over 23 million units and epitomized Germany’s post-war economic renaissance. The company’s diesel emissions scandal left it with no choice but to aggressively modify batteries, but its ID family of electric vehicles hasn’t caught on as quickly as expected. The vehicles have had problems due to faulty software and their cost is still well above the Golf’s around € 31.000 (33.306,83 $).
The most comparable model, the compact ID.3, has a starting cost of 43,995 euros. Shipments of Volkswagen’s most popular electric transport on the European continent last year were less than half of the Model Y and even further behind the Golf. The €46,335 ($49782.97) ID.4 compact SUV. Unfortunately for the company, the hatchback era seems to be ending along with the combustion era. The Golf’s 14-year reign as the best-selling car on the European continent ended in 2022, after shipments fell 14 percent. There is pressure for Volkswagen to present an electric substitute creditor.