Volkswagen's Big Gas-Guzzling American Dream

Car giant wants to have its electric cake, and eat it.

Volkswagen AG's diesel crisis communication has been far from impeccable but it got one aspect of its recovery plan spot on. Instead of sticking with its image as a maker of dirty old diesels, VW is re-styling itself as the future global leader in shiny electric vehicles.

So having patted the German giant on the head for its bold commitment to sell as many as three million electric cars a year by 2025 -- up to a quarter of the total -- it's only fair to point out a rather large inconsistency. 

To improve its dismal profit margins, get its share price motoring again and finance that electric car push, the core VW brand plans to more than double its share of sports-utility vehicles sales in coming years. Herbert Diess, the brand's chief, said on Tuesday that he aims to have 19 SUVs in its model lineup in 2020, compared to only a couple right now.

Crawling Along

VW hasn't managed to get its shares back to pre-dieselgate levels

Source: Bloomberg

He sees no contradiction between VW's SUV strategy and the electric car push. And in fairness, SUVs come in all shapes and sizes. Not all are gas-guzzling monsters and Diess is promising to cut emissions too. But make no mistake, VW intends to sell plenty of vehicles that don't fit the tree-hugger mold, including the new seven-seat, 5-metre long Atlas for the U.S. -- where the company has failed to lift sales for years.


SUVs are popular again with customers, especially in the U.S., thanks to low gas prices. They're usually very profitable for the manufacturer. So you can see why VW is stepping up here. Donald Trump's forthcoming presidency will also weigh on its thinking, as there's a good chance he'll soften fuel economy standards

Big is Beautiful

VW plans to more than double sales volumes of sports utility vehicles

Source: Volkswagen brand

VW plans to start its big electric vehicle push from about 2020, by which time electric batteries will have improved and costs fallen. Yet there's a danger in its attempt to have its cake and eat it too. Tesla has won a loyal brand following with an electric-only model line-up that almost overnight made combustion engines seem old-hat.

The more gasoline and diesel SUVs that VW puts on the roads, the greater the risk that its attempt to restyle itself as a green automobile manufacturer won't pan out in the long-term. Having hoodwinked drivers on diesel emissions, the image overhaul was already going to be a slog. 

Stalled Comeback

VW's efforts to revive sales in the U.S. came unstuck even before the diesel scandal

Source: Volkswagen

Like St Augustine, who prayed "Lord, make me chaste... but not yet", VW is promising to change its polluting spots -- eventually. Consumers might not like the dissonance.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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