Volkswagen Makes Major Investment in Electric Vehicles

11 September, 2019

The German automobile maker Volkswagen has launched what it is calling the best electric car for the masses.

The Associated Press describes the car as the leading edge of a wave of new battery-powered vehicles about to hit the European auto market. They are the result of big investments in battery technology and new factories.

But it is not at all clear whether people are ready to buy these vehicles. Electric cars still make up less than 2 percent of the market. That is partly a result of higher costs and worries about a lack of places to refresh the batteries. It adds up to a risky investment for car companies.

Volkswagen's new electric vehicle is called the ID.3. It has lots of room inside, accelerates quickly and can travel up to 550 kilometers without needing a recharge. The company believes the ID.3 will change peoples' feelings about electric cars. Volkswagen argues that the base cost under $33,000 makes it "an electric car for everyone."

A leading competitor, Tesla's Model 3, starts at about $40,000 in Europe. But the company's website notes the Model 3 can cost over $44,000, depending on additions made to the vehicle.

Volkswagen demonstrated the ID.3 earlier this week before the Frankfurt Motor Show. The company also showed off a new advertising design.

Both moves aim to demonstrate changes at the company since its 2015 scandal. At the time, the United States Environmental Protection Agency discovered that Volkswagen was using software to cheat on emissions testing. The company paid more than $33 billion in fines.

CEO of Volkswagen Herbert Diess introduces the new VW ID.3 at the IAA Auto Show in Frankfurt, Germany, Monday, September 9, 2019.
CEO of Volkswagen Herbert Diess introduces the new VW ID.3 at the IAA Auto Show in Frankfurt, Germany, Monday, September 9, 2019.

The ID.3 goes on sale in Europe next year. Volkswagen plans to launch a larger electric vehicle in the U.S. at a later date.

The company is deploying wide-reaching financial and manufacturing know-how to make a success of its electric cars. Volkswagen says it will have invested over $33 billion in this area by 2023. It has spent about $1.3 billion on a factory in eastern Germany to make the ID.3. That is the first of eight planned electric-car factories, including one in Chattanooga, Tennessee.

The company, which sold 10.8 million vehicles last year, aims for 40 percent of its sales to be electrics by 2030.

Experts warn that the industry could be stuck with slow-selling products that hurt earnings in a weakening international car market. Electrics were only 1.8 percent of the European market through the first six months of the year.

So far it has mainly been government rules leading the launch of electric cars, not the public. Above all, companies are working to make electric cars to meet stronger rules on carbon emissions and pollutants, especially in the European Union, or EU, and China.

"The industry has spent billions developing its new generation of electric vehicles," wrote Max Warburton of research company Bernstein. "But this money is being spent without convincing evidence that customers are waiting for these cars."

The EU has new limits on emissions of carbon dioxide, or CO2, the main gas blamed for rising temperatures in Earth's atmosphere. The limits come into effect fully in 2021. Cars will have to produce no more than 95 grams of CO2 per kilometer. Failure to meet these limitations means a fine for every gram of C02 over the limit per car.

Ferdinand Dudenhoeffer is with the Center for Automotive Research at the University of Duisburg-Essen in Germany. He says each electric car sold could be worth more than $11,000 in avoided fines.

China is a major market for German carmakers. It is also pushing for lower-emission vehicles. Yet the U.S. government has put less pressure on carmakers to produce electric vehicles. President Donald Trump and his administration have sought to ease rules on vehicle efficiency set by the Obama administration.

To date, electrics are most popular in wealthier countries, where the average person earns over $44,100 a year. In poorer countries, electrics are nowhere to be seen. Just 293 sold in Slovakia, for example, and 315 last year in Greece.

Financial incentives are important. In Norway, where electrics were over 30 percent of the market last year, incentives were responsible for almost $13,000 in tax breaks.

Finding a place to charge is another issue. Tesla has its own system of fast-charging stations along major roads and highways. A group of automakers including Volkswagen aims to have 400 highway charging stations by 2020.

While Volkswagen has been pushing hard for electric cars, others are going about it more slowly. Daimler has the EQC sport-utility vehicle (SUV), which shares parts with an existing traditional gasoline-powered engine. That means lower new investment spending.

BMW is launching its iX3 electric SUV and an electric Mini. BMW's experience shows the difficulties: it was first with an all-electric car, the i3 city car in 2013. But Bernstein researchers report the company lost money on it and cancelled another kind of electric car that was meant to follow the i3.

In all, some 20 new electric cars will hit the market by 2021. If demand is lacking, carmakers may have to sell the cars to rental companies and other businesses. They may also require employees to take them as company cars, or offer customers cost-cutting deals, all of which would reduce profits.

I'm ­Dorothy Gundy.
And I'm Pete Musto.

David McHugh reported this story for the Associated Press. Pete Musto adapted it for VOA Learning English. George Grow was the editor.

We want to hear from you. How popular are electric vehicles in your country? Write to us in the Comments Section or on 51VOA.COM.


Words in This Story

massesn. the ordinary or common people

batteryn. a device that is placed inside a machine, such as a clock, toy, or car, to supply it with electricity

accelerate(s) – v. to gain speed

scandaln. an incident in which people are shocked and upset because of behavior that is morally or legally wrong

emission(s) – n. something sent out or given off

convincingv. causing someone to believe that something is true

customer(s) – n. someone who buys goods or services from a business

efficiencyn. the ability to do something or produce something without wasting materials, time, or energy

incentive(s) – n. something that convinces a person to do something or to work harder

rental n. something that can be available for use in return for payment