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After dieselgate, Volkswagen goes electric

For most customers the electric car will soon be the better alternative.

Published: 22nd November 2016 11:35 PM  |   Last Updated: 22nd November 2016 11:35 PM   |  A+A-

By AFP

FRANKFURT: Volkswagen on Tuesday said it wants to be the world leader in electric cars by 2025 as the German car giant unveiled a major shift to clean-energy vehicles in the wake of the dieselgate emissions cheating scandal.

The US market, where the pollution crisis first erupted, will play a key role in the revamp, VW brand chief Herbert Diess said, announcing a "comeback story" for the region with plans for electric cars to be built in North America from 2021.

"By 2025 we plan to sell one million electric cars per year, and by then we also want to be the global market leader in electromobility," Diess said at a presentation of the brand's future plans.

"Going forward our electric cars will be the hallmark of Volkswagen," he told reporters at the VW group's Wolfsburg headquarters in northern Germany.

The company's switch to electric will be made possible through new investments and economies of scale, Diess said, and is a crucial part of the troubled brand's efforts to reinvent itself.

The VW brand on Friday already announced the biggest revamp in its history, saying it would cut 30,000 jobs to save 3.7 billion euros ($3.9 billion) a year by 2020, while ramping up investment in future technologies such as e-cars, self-driving cars and digitalisation.

"Our industry will undergo more fundamental change over the next 10 years than ever before," Diess said, predicting that "the breakthrough" of electric vehicles was just four or five years away and would be driven by environmental concerns.

"For most customers the electric car will soon be the better alternative," he said.

'Electrify America'

The shake-up at Volkswagen's core brand comes as the group tries to recover from the biggest crisis in its history after it admitted last year to installing emissions cheating software in some 11 million diesel vehicles worldwide.

The so-called defeat devices, discovered by US regulators, could detect when a vehicle was undergoing tests and lowered emissions accordingly to make the cars seem less polluting than they were.

Most of the cars bore the Volkswagen logo but vehicles by other VW group brands such as Audi, Seat and Skoda were also affected.

The scandal hurt sales and damaged the reputation of the proud German company, pushing the group to its first loss in over two decades last year.

But even before dieselgate, the VW brand had been struggling with profitability, weighed down by high costs and low productivity.

"The image of our brand has suffered from the diesel crisis, many people no longer trust us as they used to," Diess said. "Our main task is to win back this trust."

American customers were particularly turned off by the cheating scandal, dealing another blow to a brand that has never been very popular in the US -- something VW is determined to change.

"In North America we want to write a comeback story," Diess said, starting by offering a wider range of SUVs and limousines.

Next, under the motto "Electrify America", VW will begin the local production of its electric cars in the region in 2021, he added.

 

'Second chances'

But analyst Frank Schwope of Nord/LB bank said he was "sceptical" about the auto maker's ambitious plans for the US.

He said the group had already taken a big hit there over dieselgate, agreeing to pay out $14.7-billion in a settlement with US authorities that includes compensation for nearly half a million drivers.

With more legal costs sure to follow, he described the country as "a bottomless pit" for Volkswagen.

Auto industry expert Stefan Bratzel took a more optimistic view.

"It won't be easy but it's not impossible because there's a culture of second chances in America," he told AFP.

VW said the new strategy should help triple the brand's global operating profit margin from two percent in 2015 to six percent by 2025, a goal Bratzel said was realistic "considering other carmakers are already achieving such margins".

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