Monday, May 20

Volkswagen sees electric vehicles as a way to grow in the United States

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 way to go to a Grateful Dead concert was a Volkswagen Microbus.

Volkswagen is trying to harness some of that nostalgia in its latest push to recapture the status and sales it enjoyed in the United States during the heyday of the Beetle and Microbus in the 1960s. But this time it hopes its flagship models will be electric.

The German automaker is second only to Toyota globally, but is a niche player in the United States. Part of his plan to revive his fortunes here is to focus on a new electric model that resembles the Microbus, the ID.Buzz, and revive the Scout brand with a line of electric pickups and sport utility vehicles.

Last week, as giant construction equipment kicked up clouds of dust, Volkswagen executives and local officials gathered near Columbia, S.C., to break ground on a factory that will build vehicles with the Scout badge for the first time since 1980.

Volkswagen is one of several foreign automakers that see electric cars and the disruption they are causing as a way to challenge dominant players in the United States. Volkswagen, which also owns Audi, Porsche, Bentley and Lamborghini, aims to at least double its U.S. market share by the end of the decade from a meager 4 percent today.

“This market is going electric and everyone is starting from scratch,” Arno Antlitz, Volkswagen’s chief financial officer, said in an interview. “This is our unique opportunity to grow.”

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

“Electric vehicles are helping our brand be seen as a technology leader,” said José Muñoz, Hyundai’s chief operating officer. They also attract a more educated and more affluent customer than the South Korean company’s gasoline-powered vehicles, he said in an interview.

The list of companies dominating electric car sales looks very different from the top rankings for overall sales in the United States, suggesting a future in which a different group of companies will rule.

The top five companies in the United States for all engine types are General Motors, Toyota, Ford Motor, Hyundai and Stellantis. In electric cars, Tesla is No. 1 by a wide margin, followed by Hyundai, GM, Ford and Volkswagen. Toyota is a minor player in electric cars.

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

Volvo Cars is another company hoping to benefit from the changes brought about by electric vehicles. The Swedish automaker, which is majority-owned by Chinese group Geely Holding, reported a 26% increase in sales in the United States last year.

Much of this growth comes from hybrids that have a gasoline engine and can travel shorter distances on batteries. But Mike Cottone, Volvo Car president 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 will start at $35,000. The company will also begin delivering the EX90, a seven-seat SUV made in South Carolina and the starting price will be around $80,000.

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

Volkswagen has been trying and failing since the 1970s to become a bigger presence in the United States, and analysts are skeptical that things will be different this time. “I’ve seen Volkswagen set these goals before,” said Michelle Krebs, executive analyst at Cox Automotive.

Established automakers will not be pushovers. GM and Ford are also investing heavily in electric vehicles, while Toyota has said it will begin producing a large electric SUV in Kentucky next year.

Krebs pointed out that U.S. auto sales are growing slowly, making the fight for market share a zero-sum game. “There’s this little growth that everyone is looking for,” she said.

Volkswagen’s latest big move into the United States ended in scandal. In the early 2000s, the company tried to sell cars with “clean diesel” engines to Americans. It advertised the fuel, used in European cars much more than in American cars, as more environmentally friendly than gasoline.

But the campaign collapsed in 2015 when US regulators found that Volkswagen had used software in vehicles to cheat emissions tests. In reality, cars polluted as much as long-haul trucks.

The scandal had a boon for Volkswagen. That prompted the company to invest early in electric vehicle technology and build cars designed from the ground up to run on batteries, rather than making cumbersome modifications to gasoline-powered models. In Europe, Volkswagen’s various electric brands together outsell 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 intended to use the same strategy he had adopted while overseeing the company’s operations in Brazil, where Volkswagen’s market share rose from 9 percent to 16 percent.

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

In the United States, he said, this is likely to include gasoline and hybrid cars, as well as fully electric vehicles. Volkswagen plans to import the ID.7, an electric sedan, and the ID.Buzz. Di Si hinted that there could 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 plants in Chattanooga, Tennessee, and Puebla, Mexico, which together will produce at least 80% of the company’s cars sold in North America. This will help buyers of cars from its Volkswagen, Audi and other brands qualify for federal tax credits of up to $7,500 per car.

Scout will fill an important gap in Volkswagen’s portfolio: pick-ups, among the most popular vehicles in the United States. By reviving the Scout, which was one of the first passenger vehicles capable of navigating dirt roads and city streets, Volkswagen hopes to attract buyers who typically purchase off-road vehicles from U.S. brands such as Chevrolet, Ford and Jeep.

The South Carolina factory will emphasize the made-in-America vibe when the first Scouts go on sale in late 2026. Volkswagen inherited the Scout brand when the company’s truck subsidiary, Traton, acquired Navistar, a U.S. company formerly known as International Harvester, in 2026. 2021.

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

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

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

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