Volkswagen AG held its Annual Media Conference in Berlin this week and took the opportunity to reiterate the auto maker’s intention to expand the availability and production of electric powered vehicles globally on a massive scale.

The German automaker and global leader in automobile production had little choice but to amp-up its commitment to electric powered vehicles after the 2016 diesel emissions scandal that rocked the automaker and resulted in $25 billion in fines, owner compensation and penalties, not to mention criminal indictments of certain executives.

This week’s update included a goal to sell at least three million electric vehicles per year by 2025 which would represent the largest availability of any global automaker.

To support that goal, VW aims to build and operationalize 16 new electric vehicle manufacturing facilities over the next two years. E-vehicles are currently produced at three manufacturing facilities.

The global automaker’s CEO, Matthias Muller, further took the opportunity to reiterate to reporters that VW would not be turning its back on conventional drive systems. Modern diesel drives were part of the solution, not part of the problem, he stressed – with regard to climate change.

We are making massive investments in the mobility of tomorrow, but without neglecting current technologies and vehicles that will continue to play an important role for decades to come. We are putting almost EUR 20 billion into our conventional vehicle and drive portfolio in 2018, with a total of more than EUR 90 billion scheduled over the next five years.

 

Value-Chain Transformation

Supply Chain Matters has noted in our Automotive, Industry-Specific 2018 Predictions, that the all-in industry movement toward producing far larger numbers of electric and hybrid-powered automobiles and trucks requires stepped-up efforts in global strategic sourcing and supply management related to new value-chain materials. That obviously includes locking-in long-term supply of battery raw materials and battery supplier output, along with industry or manufacturer efforts to influence what the regional or global epicenter of battery technology advancements and production might eventually be.  That includes countries such as the Eurozone, China, Japan, and the United States.

VW indicated earlier that the company had set aside €50 billion for strategic battery supply needs and this week, indicated that half of that budget has been invested to-date.  Supply agreements have been secured with China based Contemporary Amperex Technology, and South Korean based Samsung SDI and LG Chem Ltd. Further indicated is: “A supplier decision for North America will be taken shortly

To accomplish its aggressive manufacturing timetable, VW has made strategic decisions on product platform along with manufacturing automation strategies. According to a report posted on Techcrunch, VW will launch an MEB Platform as the product design underpinning of multiple branded electric models. According to this report: “The MEB platform is designed to be relatively fixed in its configuration, so that it can be produced at scale affordably with little customization model to model, but also allowing for designs ranging from light compacts, to sedans and SUVs to be built on top.

This strategy addresses a goal for standardized component technology to foster global scale in enabling a flurry of new models. According to a published report by The Wall Street Journal,

VW CEO Matthias Muller indicated that among all VW brands, a product launch of a new electric vehicle would occur “virtually every month” starting in 2019.

Industry Implications

There should be little doubt that VW has established quite an aggressive plan for electric vehicle development and distribution, one that has significant industry implications. VW has also demonstrating deep financial pockets.

VW joins global leader Toyota which has recently accelerated its timetables for new electric vehicle model development, more advanced battery technologies along with further development of alternative fuel powered vehicles. No doubt, Toyota will also be a global influence on expanding electric battery development and production centers including possibly one in the United States. It too has deep financial pockets with the ability to fund and leverage global scale.

Not to be outflanked, General Motors has aggressive plans as do other global brands.

The obvious “elephant in the room” is that of Tesla, which has garnered upwards of half a million customer reservations in the mass-produced Model 3 vehicle. It is no secret to our readers that Tesla has struggled to ramp-up mass production of the Model 3, as well as scale-up its manufacturing presence beyond the United States.

Business media such as the WSJ featured an opening byline that “Volkswagen has pulled into Tesla’s rearview mirror and vowed to overtake the electric car pioneer…”

From our Supply Chain Matters lens, the industry indeed has a confrontation on the horizon, one that brings existing manufacturing and supply chain savviness and global scale of global players directly against an electric vehicle pioneer with enormous product design savviness but limited global supply chain and manufacturing experience and capability.

It is about to get very interesting.

Like that classic scene in the original Jurassic Park film, the dinosaur’s footprints can be loudly heard, and they are running very fast indeed.

 

Bob Ferrari

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