VW CEO: Existential electric race awaits after pandemic
Volkswagen AG Chief Executive Officer Herbert Diess vowed to pursue a sweeping transition to electric cars, declaring it a matter of survival even as the coronavirus risks upending business in the near term.
While the world’s largest carmaker has a “healthy order bank,” its development in the coming months hinges on major economies controlling the disease and averting restrictions that would hurt demand and operations, Diess said Thursday. Despite the uncertainties, VW will press ahead with aggressive investment in new technology to avoid falling behind as the auto industry fundamentally changes.
“If you’re not fast enough, you’re not going to survive,” Diess said during a virtual Bloomberg event. “In the long run, climate change will be the biggest challenge mankind is facing.”
While the CEO warned another lockdown would be “difficult to manage,” the German automaker has shown it can weather turbulence. It swung back to profit in the third quarter, echoing robust results from peers including Daimler AG, Tesla Inc. and Ford Motor Co. on the back of a swift demand recovery in China.
Another wave of new infections in key markets, an unsettled U.S. election and Britain’s messy exit from the European Union are now bearing down on the auto industry. Car registrations fell in Europe’s four largest auto markets last month, signaling that sales have relapsed after a surprise gain in September.
Beyond managing through those issues, the more complex task for Diess is positioning the 83-year- old industrial behemoth for the future. Volkswagen, which operates the Audi, Porsche and Lamborghini brands, mastered the combustion engine and now wants to control the software brains for next-generation vehicles.
“This is the most important race and decisive point for our industry in next five to 10 years,” the 62-year- old executive said, adding he won’t compromise on the company’s technology roadmap even if the coronavirus crisis saps sales. “We think we can do it. We have software skills, and we are ramping up fast.”
Volkswagen shares rose 1.5% at 2:22 p.m. in Frankfurt. The stock has declined about a quarter this year, valuing the company at 70 billion euros ($83 billion) — roughly a fifth of Tesla’s market capitalization.
Pulling off the transition and trying to catch up with Tesla have been made all the more challenging by divisions within VW’s supervisory board and powerful works council, which publicly clashed with the former BMW AG executive earlier this year.
The coming months will be critical for the CEO to show his electric push is working. After the launch of the Europe-focused ID.3 hatchback was delayed due to software problems, VW is going global with the introduction of its crossover sibling, the ID.4, which will be built and sold in China and eventually the U.S.
To bolster its electric push, Volkswagen plans to raise investment in the technology, build up battery production capacity and transform entire plants to churn out electric cars, Diess said.