Volkswagen Group, the parent company of VW, Audi, Porsche, Ducati, Skoda, Seat, Pfister, Bentley and others, had its big announcement this morning. What was the big announcement? A lot of money for EV and software development. Read between the lines a little, and you’ll see some more interesting news: VW isn’t giving up on gas engines. Yet.
Beware of big annual presentations, especially from Volkswagen. You know Teddy Roosevelt’s dictum about speaking softly and carrying a big stick? That’s not VW’s style. VW loves to speak loudly. VW loves the spectacle. That’s fine. I like a little spectacle, myself.
There’s real news between all the hype, however, and we’re gonna wade into it. Then we’re going to talk about Chinese batteries.
Volkswagen’s Investing $193 Billion In The Future
Hey, look, a big number! Volkswagen is going to invest $193 billion to make the cars of the future. Most of that investment will be related to electric cars and what VW calls “digitization.”
You can read the whole thing here in this convenient British press release, but I’ll highlight it for you because you aren’t getting paid to read this stuff.
In total, the Group is planning to invest EUR 180 billion between 2023 – 2027 in the most attractive profit pools, including in particular the Group’s battery strategy, growing its presence in the North America region, increasing the competitiveness in digitalization and products in China, as well as continuing to develop the Group’s leading product portfolio. More than two-thirds (68 percent) of the investment will flow into the future fields of digitization and electrification. In the last five-year plan, the figure was 56 percent. As early as 2025, every fifth vehicle sold worldwide is expected be one with an all-electric drive. A major reason for the investment increase is the up to EUR 15 billion ringfenced for the construction of cell factories by the battery start-up PowerCo and upfront expenditures for securing raw materials as part of the implementation of the battery strategy
Ok, so some big stuff here:
- VW expects 10% of its cars from all its brands sold this year to be battery electric vehicles.
- It expects it could reach 20% by the end of 2025!
- VW’s battery arm, the wonderfully named PowerCo, is getting a lot of investment (see also the announcement yesterday it was building a new battery plant in Ontario).
- VW is going to fight it out with everyone to get as many raw materials as possible.
The “digitization” term is my least favorite of the neoligisms that German automakers use to hand-wave over complex and half-baked concepts. “Digitization” is the new “mobility.” The best explanation I can give is from VW board member Ralf Brandstättaer who used LinkedIn a few months ago to kinda describe it:
The transformation to electric mobility in China is a done deal and is visible everywhere on the roads here. Now it’s a matter of driving forward the digitization of cars. In particular, autonomous driving. This is the truly disruptive factor for our industry. This is where the success of the future will be decided. China is already a leader in the development of this core technology and is also aiming for market leadership in the future.
So “digitization” includes autonomous driving and other, vaguely-defined concepts for software-enabled services. So what about gas-powered cars?
Additionally, there will be ongoing investments in the last generation of combustion engines. The peak in investment is expected to be reached in 2025, after which it will continuously decline.
If 20% of the cars VW sells in 2025 are truly electric, then that means 80% are still gas-powered. We’ve almost certainly reached peak ICE and I don’t see a reason why we’d ever go back. The reality is, however, that automakers still have to face increasingly difficult emissions standards for their remaining gas and diesel cars. Meeting those standards costs money.
Or, to quote VW CFO Arno Antlitz:
“We expect to reach 20 percent electromobility in new sales from 2025 and are already investing two-thirds in that area,” Antlitz said. “On the other hand we need to keep combustion engines competitive… that is a double burden.”
Even China Wants CATL To Slow Down
Remember when I was talking about Volkswagen fighting with everyone to get raw materials? It was, like, five paragraphs ago. One of the biggest fights is with CATL, the Chinese company that controls more than a third of the global battery market. You know, the company that tried to start its own price war to squeeze out competitors by guaranteeing that the price of lithium would drop 50% this year?
I am, apparently, not the only one worried about this. Why would China be concerned?
It’s like when your roommate starts mining gold in Warcraft and selling it on the Internet, so he’s got a little money for pizza. It’s great and you’re happy for him to be doing so well. Then he starts utilizing other people to help him, and one day he comes to you, very seriously, and says “Hey, if a dude who looks like he works for the Malaysian mafia ever comes to the door just don’t open it, ok?”
Not speaking from experience here…
Anyway, China’s President Xi Jingping last week got a presentation from CATL where CATL’s chairman talked about how it was crushing everyone. According to Reuters, Xi said he was “both happy and worried” after seeing the presentation. If you were curious, that’s how I feel about The Autopian most of the time.
Here’s some more:
“Emerging industries must do a good job in planning, figuring out how big the market is and where the risks are,” Xi was quoted as saying.
“They should avoid marching ahead alone in an invincible fashion, only to be caught out by others and fail in the end.”
I say that to Jason and David all the time! Me and Xi, peas in a freakin’ pod.
Why am I bringing this all up now? Because CATL was going to do a $5 billion listing in Global Depository Receipts, which is the weird Swiss way that they allow you to buy and trade bank-issued securities by Swiss banks for foreign companies. It’s a whole thing. Chinese companies want to raise money, like everyone else, and these companies want to do it as cheaply and easily as possible. The real power move is to list in the United States, but, uh, giant balloons and all…
The Swiss, shockingly, don’t seem to be too bothered by China’s geopolitical ambitions and seem happy to be intermediaries. For money!
That CATL deal to do a GDR deal has been slowed down because Beijing is basically, like, “why tho?”
Here’s how Reuters explains what’s going on:
The world’s largest battery maker, formally known as Contemporary Amperex Technology Co (CATL) (300750.SZ), had expected to receive a green light for the listing in Zurich from the Chinese securities regulator by the end of January, said one of the sources. But the process is taking longer than expected, all three sources told Reuters.
There isn’t much detail and it’s quite possible that China eventually allows the deal to go through, but Reuters says the issue is “the large scale of the offering.”
Weird.
At Least One New Chinese Company Is Getting A U.S. IPO, Maybe
Let’s combine all of the above stories into one story, shall we? WeRide Technology, a driverless tech startup in China with backing from Renault-Nissan-Mitsubishi, has reportedly filed for a U.S. IPO in order to raise as much as $500 million.
Bloomberg has the scoop, via Automotive News China:
The Guangzhou-based startup is working with advisers on a potential listing that could take place as early as the first half of this year, the people said, asking not to be identified discussing a private matter.
Chinese companies have only just resumed pursuing U.S. IPOs in recent months, after Didi Global Inc.’s 2021 listing prompted a crackdown by Beijing on companies with sensitive data selling shares abroad. To address the issue, WeRide will outsource data collection to an entity that won’t be part of the planned U.S. listing, the people said.
The Americans are worried about Chinese technology being used to steal American data, the Chinese are worried about America stealing Chinese technology. What a fun time to be alive!
Child Labor Is Bad
It would seem that child labor laws wouldn’t be a super highly politicized issue. I don’t want to get too political here, but making children work in factories for long hours instead of going to school is bad. We promise to only make my daughter Bette and Jason’s son Otto work, tops, four hours a day making your merch.
Child labor is back in the news lately after a Hyundai supplier got in trouble for exploiting children to make its stuff. Hyundai said it investigated the issue and was cutting ties with suppliers involved in child labor. A group of about 60 Dems in congress are worried that wasn’t good enough, and put out a letter to the Department of Labor asking them to do better:
Earlier this year, Hyundai publicly committed to severing ties with its suppliers in its U.S. supply chain that were found to use child labor. We are concerned that Hyundai, at DOL’s suggestion, reversed course on this commitment and will not cut ties with its Alabama suppliers that use child labor. Clearly, there is a systemic effort within the Hyundai supply chain to recruit child labor from abroad, undermining workers in other parts of the U.S. auto industry. And it must be addressed immediately. It is abhorrent this activity continues even after a DOL investigation. We urge DOL to take immediate action to rid Hyundai’s supply chain of child labor and hold those responsible to the fullest extent of the law.
Again, this seems non-partisan, but there are some Republicans from certain states who seem to be trying to roll back some requirements designed to protect kids, so there’s definitely not as united a front on this issue as you might think.
The Big Question
We’ve already reached peak gas-powered car; when do we hit the point where 50.001% of new cars sold (globally) are electric vehicles?
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Photos: CATL, WeRide, VW, Hyundai
“We’ve already reached peak gas-powered car; when do we hit the point where 50.001% of new cars sold (globally) are electric vehicles?”
It ain’t happening anytime soon, if ever.
https://news.yahoo.com/lithium-supply-ev-targets-miner-181513161.html
“when do we hit the point where 50.001% of new cars sold (globally) are electric vehicles?”
My guess is it will happen around 2030.
‘It would seem that child labor laws wouldn’t be a super highly politicized issue. I don’t want to get too political here, but making children work in factories for long hours instead of going to school is bad. We promise to only make my daughter Bette and Jason’s son Otto work, tops, four hours a day making your merch.’
Obligatory:
https://youtu.be/zF_U4VGl1Jk
“You can read the whole thing here in this convenient British press release, but I’ll highlight it for you because you aren’t getting paid to read this stuff.”
You’re right, we’re paying to read stuff 🙂
well, duh. We’re just not ready for 100% EV yet, and that includes the cars themselves.
However, electrification should start with school buses. THAT is the best place to start and where they will be most successful. Regular routes, and time to charge during the school day. They can use smaller batteries, which cost less than bigger batteries.
I think a 100% electrification goal for school buses by 2030-2035 is reasonable due to their driving conditions that are conducive to electrification.
Hyundai will build a factory in Arkansas, which now allows child labor.
There’s a reason EVs never took off until Tesla made the model S. That’s not when batteries finally got good enough, it’s because they buried the immense cost of batteries in the “luxury tax”
Yes you are right, from an engineering standpoint, school buses make the most sense. From a financial standpoint, school district have enough budget problems already.
Let the tech develop in cars bought by people with disposable income first.
Diesel fuel is very expensive, even more expensive than gasoline, making the payback period quite short. Therefore, it shouldn’t be a problem for the school district’s budget.
Our whole district runs off 1 diesel pump. It won’t run off 1 charger. The up front costs are much higher than the busses themselves.
That’s ignoring how slowly stock rolls over too. My kid’s bus has been out of commission for 2 months. The crappy backup bus they’ve been slapping a magnetic 12 on in the interim was one of the shiny new busses teams took to away meets my freshman year. That was 1994.
To make EV school buses built with that child labor…
I’m not sure that we ever break 50% BEV globally. There’s just too much infrastructure to build out for it in the developing nations that will enjoy the primary market growth. By the time they’re in that position we should be seeing more hydrogen in the mix, particularly on the heavy vehicle end.
If the 2035 bans stay in place that’s probably when it will have its strongest possibility, but once the used market discovers its lower end can’t exist in an all-BEV future, those bans should become politically untenable.
You’re confusing the new market with the used market. Think: how many 20-year-old cars from the early 2000’s are still on the streets today? As the average ICE car is lasting longer & longer this effect will be even more pronounced. Even if the new market turns all (or >90%) EV by 2035, as long as gasoline is available ICE cars will remain an important part of the used market for many decades more afterwards (probably well into the 2060’s).
VW, then, is doubling its percentage of EV production every two years. If that persists, it will be making 100% EVs by 2030.
And if we keep doubling, it will be 200% EVs by 2031.
I know VW is particularly excited to get rid of their ICE engines, given that they haven’t been able to make a good one in years. Having had the distinct displeasure of working on various Audi and VW engines in i4/V6/V8 form, I say good riddance.
Yeah but it’s still VW, prepare for a bold new frontier of wiring problems.
“Volkswagen Group, the parent company of VW, Audi, Porsche, Ducati, Skoda, Seat, Pfister, Bentley and others, ”
Pfister?
I think Matt’s just checking to make sure we’re paying attention.
yeah, those shitty faucets, and they charge you for a warranty replacement
I had a Pfister pfaucet once but the pfit and pfinish wasn’t as good one pfrom Kohler.
Yeah, they are in the home plumbing game.
Child labour is bad, well obviously more beatings are required to get the quality up
Seriously, the geniuses who run Iowa recently passed a law allowing 14 year-olds to work in meat packing plants. Other pols are pushing for similar measures, including allowing those same 14 year-olds to drive.
All in the name of keeping labor cheap and valuing workers less.
14 year olds driving isn’t new, though. Back in my youth, 14 was when you could get a provisional license for farming operations. No testing required.
If they’re making 14 year olds actually pass licensing tests and the like, that’s an improvement.
I got my learner’s permit at 14, license at 15.
I grew up in Iowa, we were allowed to drive legally to school under a farm license at 14 and 15, 16, full license including motorcycle licenses were fine at 16. results were better drivers at 18.
We all already worked since we were old enough to detassel or throw a hay bale anyway. There was no restrictions on meat plants, the restriction was the same as any after school job, only 20 hours a week. I suspect many a kid that actually worked for his money would be tickled to get meat packing pay. it was way better than min wage at HyVee.
Interesting to see the peak ICE topic this morning, as this article came through the email list yesterday- https://www.bnnbloomberg.ca/carmakers-can-kiss-pre-pandemic-combustion-car-sales-goodbye-1.1893191
Globally, looks like peak ICE was perhaps in 2017. Given that the world’s largest automotive market (among others, Norway is already 80%) is quickly shifting to EV, if we’re talking about only passenger vehicles, I wouldn’t be surprised if 50%+ EV is by 2030 or so.
it will be interesting to see how it shakes out, even though they have tried EV’s with varying success for as long as I have been alive and technically since the late 1800’s. this current push seems to have the most steam behind it. But I am not sure I believe lugging around 2 to 4 thousand lb batteries is where we will be. It would be interesting to see if a say an alternate fuel cell with a big capacitor will be the next LS swap, but for EV’s with $20,000 batteries needing replacement.
> lugging around 2 to 4 thousand lb batteries
Dude, that’s not the norm. The long-range (up to 303 miles EPA) Ioniq 5, has a battery that weights only 1 thousand lbs. Even the Rivian R1T Launch Edition Large Battery Pack weights in less than 2k (specifically, 1750lb) .The only one lugging around >2000 lb of battery is the bloated gigantamax Hummer EV, and even that is not near 4k (it’s 2923lb).
We don’t need more COW’s (Computers On Wheels) on the roads. I think Lexus has the right idea here. Give us cars, but electric.
I bet 50% EV happens in the early 2030’s when lithium mines are operating, battery factories are churning out billions of cells a year and public charging that isn’t Tesla isn’t such a roll of the dice.
It would be an interesting experiment — and VW’s numerous brands would make a good platform — to see an enterprising carmaker offer a car that is decontented (no touchscreens, “self-driving” or similar gewgaws the government doesn’t force on them), simple, compact and economical in addition to their high-tech, digitized, connected models.
I would suggest ICE power, though. EVs are not simple, owner-serviceable vehicles right now and, given the rush to add more trinkets (and related software) likely will never be.
I also will be investing billions in “the most attractive profit pools.”
There’s not much that brings about feelings of dread in me quite like a German car manufacturer talking about “digitization”. The latest and “greatest” BMW, Mercedes, and VW interfaces/tech are an absolute nightmare to interact with and have received nearly universal scorn. The last thing German manufacturers and their well documented reliability issues need to be doing is continuing their “more is more” approach and cramming even more technology into their vehicles. They’re intentionally designing disposable products at this point and to me it seems like it’s going to mitigate a some of the potential environmental benefits of their EV focus. Having a bunch of 5-10 year old EVs being scrapped is going to be an issue.
I grew up in a family that drove German cars and a lot of my enthusiast roots are in them, but my interest in owning modern ones is decreasing every day. It does seem like the old “give a Japanese engineer a problem and they’ll come up with the simplest solution, give a German engineer a problem and they’ll come up with the most complicated one” adage I’ve come across in enthusiast circles has some truth to it.
“The real power move is to list in the United States, but, uh, giant balloons and all…”
Matt I just want to compliment you on the style and tone with which you’ve written this and other articles here. You’ve nicely balanced a bit of light humor that we all come here for with hard news in a way that makes it a pleasure to read. The quoted sentence above I found particularly entertaining.
2052 is when we hit 50.001% of sales being pure EV