Volkswagen CEO's stunning revelation. Did Volkswagen's Electrification plan just
backfire? Volkswagen made a huge announcement in November
2018 that it would invest $50 billion in electric vehicles over the following five years. This marked the beginning of the company's
much-touted "electric race." The German car manufacturer, which came into
the competition for electric vehicles somewhat late, promised to make up for lost ground. It set the lofty objective of leapfrogging
its competitors in the sector, many of which had placed significant bets on EVs many years
earlier. At first, signs everywhere suggested the company's
aggressive approach to EV strategy was bearing fruit. However, as of late, the situation has grown
a great deal less transparent. Indicators now suggest that Volkswagen's electric
vehicle program may have slowed down. Is Volkswagen backing out of the EV race? And why is the company shelving its upcoming
EV models? Various new vehicle models quickly followed
the initial launch of Volkswagen's electric car lineup. These models were developed in a common platform
that goes by the acronym MEB, which stands for the Modular Electric Drive Matrix. This patented drive platform was designed
to be as adaptable as possible, enabling it to function effectively in various vehicles. This function was essential to successfully
implementing Volkswagen's ambitious EV product strategy, which sought to introduce at least
70 new battery-electric car models by 2028. Additionally, the roadmap established an aggressive
sales target, projected to deliver 22 million BEVs by 2028. The rollout of its electric vehicles got off
to an impressive start. In 2019, the firm achieved third place among
automakers in the world's most advanced market by selling 45,850 battery electric vehicles
in Europe. In 2020, Volkswagen's sales increased by more
than 300%, propelling the company to the top of the electric vehicle market in Europe. It brought the total number of BEV deliveries
worldwide to 452,900 in 2021, nearly double the previous year's total. In 2022, Volkswagen's electric vehicles began
to show some indications of slowing down following several years of explosive expansion. The increase in sales continued throughout
the year but at a slower rate than before. Volkswagen's battery electric vehicle (BEV)
sales were up merely 26% from 2021, with a final global deliveries figure of 572,100
cars. This year, the automaker is already shelving
some models. According to Volkswagen, the official celebration
that was going to mark the start of production of the ID.7 in Emden would be postponed because
of the lower output. This is one of the numerous impacts of reduced
production. The manufacturing of the model had already
begun according to plan, but they are already working on producing a few models. There is also currently no new date that has
been set for the Emden event. According to research that was recently published
by Cox Automotive, automakers such as General Motors, Ford, Hyundai, and Toyota all have
more than 90 days' worth of electric vehicles in their inventory that have not been sold. Car dealerships all around the United States
currently have more than 92,000 new electric vehicles in stock. That's more than quadruple the number of electric
vehicles that were on dealer lots a year ago, and it may indicate that the expansion of
the market for electric vehicles across the country has temporarily slowed down. According to Reuters, as of June 30, General
Motors had a supply of Cadillac Lyriqs at dealerships that were sufficient to last for
50 days. GM also said that more than 80 percent of
the Lyriqs and GMC Hummer EVs it has made are still being sent to dealers. According to Cox Automotive, Ford has 86 days'
worth of F-150 Lightnings and 113 days' worth of Mustang Mach-Es in inventory. However, Ford itself claims that these estimations
are inaccurate and that Ford actually only has 73 days' worth of F-150 Lightnings. During the first half of the year, Ford produced
46,238 Mustang Mach-Es and only sold 14,040 of them. VW has admitted that there has been "some
softening in EV sales in the U.S. recently," and the company has 131 days' worth of ID.4s
in its inventory, according to the data provided by Cox. The German company reported a considerable
demand for the vehicle, but the company does not produce enough all-wheel-drive models
to match the demand. Volkswagen also claims that there is some
"customer confusion" due to the "tax credit eligibility of EV models." Although a growth rate of 26% per year can
hardly be considered a failure in absolute terms, the relative slowdown in Volkswagen's
growth in 2022 was more than enough to cause anxiety among certain industry analysts and
investors. Since the beginning of the year, the corporation
has successfully reduced some of these worries by significantly increasing the number of
electric vehicle sales. Compared to the first six months of 2022,
sales of the company's pure electric vehicles increased by over half during the first half
of 2023. They went from 217,200 to 321,600. But it is still a far cry from its fast-paced
growth. According to the findings of a recent survey,
it is proving to be a challenging effort to get consumers, particularly those with lower
incomes, to think about electric vehicles in today's market. Autolist, an online marketplace for purchasing
automobiles, even said that certain buyers are becoming more resistant to electric vehicles. Lower-income consumers, in particular, continue
to believe that EVs are unattainable. In a study it conducted between February and
July on 3,104 customers, 46% of those earning less than $30,000 yearly named the upfront
expenses of EVs as a key obstacle, and a third of those buyers stated they had no place to
charge where they resided. According to Corey Lydstone, founder and CEO
of Autolist, the vehicles need to be priced affordably for all consumers to secure widespread
adoption of electric vehicles. Unfortunately, those vehicles are now almost
exclusively restricted to higher-income households. Also, 38% said electric vehicles are better
for the environment than gas vehicles. This is a decrease from 2022, which was high
at 46%. This was interesting because, even though
electric vehicles are frequently portrayed as an unavoidable trend in the media and by
automakers themselves, not everyone sees them in this light. Even with fewer obstacles to entry, that does
not necessarily indicate that all customers are willing to jump on board. In addition, many individuals are still purchasing
vehicles that run on gasoline. Electric vehicles in the United States represent
less than 1% of the 286 million running vehicles still out on the roads, as Quincy Krosby,
chief global strategist at LPL Financial, stated. People are also aware of the range anxiety,
the time required to charge, issues around power outages and the grid, a shortage of
services for repairs and maintenance, and insufficient performance in extremely high
or low temperatures. Because of this, the rate of growth at Volkswagen
has somewhat slowed down. Additionally, it has not met the standards
it had set for itself. The delivery of around one million battery
electric vehicles (BEVs) in 2023 was one of the company's goals; BEVs were expected to
account for approximately 11 percent of total vehicle sales. However, after looking at the first half of
the year, it appears those goals are already unattainable. Volkswagen is well behind the pace. The BEV division of the corporation has also
seen varying degrees of success in the various key markets. Although the car manufacturer has successfully
maintained its position as the leading player in the European market ever since it took
first place in 2020, it has been less successful in the Chinese market. Volkswagen only utilized 16% of the MEB platform
production capacity in China during the first half of 2023. This underutilization was due to weak sales,
with one notable exception: the popular ID.3 model, for which there was a 53% rise in deliveries
compared to the previous year. In the meantime, sales of every other model
in the ID series went down significantly, Due to this, Volkswagen has been forced to
admit that its initial goals for EV growth are no longer attainable because the company's
overall growth has slowed, in addition to recent setbacks in China. The company also cited consumer opposition
to adopting electric vehicles as the reason for the production cuts announced on July
6 at its primary electric vehicle factory in Germany. After this, the company revealed during its
earnings report on July 27 that it had reduced its delivery expectations for the entire year
when announcing its financial performance for the first half of the year. Evidently, Volkswagen is discovering that
the shift to electric vehicles is slightly more challenging than it had initially anticipated. Recent losses have compelled the company to
review its strategy and goals to adjust them appropriately objectively. Volkswagen has the resources necessary to
support its transformation, even though it will have cash flow deficiencies. Competition is also intensifying, and customers
are cautious. However, in spite of the recent difficulties,
Volkswagen has not materially veered from its long-term goal of leading the global EV
sector. In fact, the manufacturer underscored its
ongoing commitment to electrification in March when it revealed its plan to invest a further
$193 billion in electric vehicles and software development over the next five years. That's all from this video. What do you think about Volkswagen's sales
decline? Do you think it is a problem in the EV sector
or a Volkswagen problem? See you at the next one.
