SUVs and EVs: Volkswagen Outlines Future-Product Strategy ""
Posted on: September 8, 2017

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Volkswagen I.D. Buzz concept

Volkswagen has been running on slim margins in the United States and beyond—further squeezed by the costs related to the diesel-emissions scandal. To increase its profitability, it’s shifting as quickly as it can toward the growing market of SUVs and crossovers. It has a lot of ground to make up. The company is ramping up some 19 SUV and crossover models globally by 2020, according to Herbert Diess, head of the Volkswagen brand. By 2020, Volkswagen’s global sales will be 40 percent SUVs and crossovers, versus its current level of less than 15 percent.

Diess pointed to the new Tiguan, which recently launched in the United States, China, and Russia, as “a very good example” of this strategy, saying, “It’s working worldwide.” The 2018 Tiguan is significantly larger than its predecessor and has a third row of seats; at the moment, it’s selling alongside the decade-old previous-generation model, now called the Tiguan Limited. Volkswagen also recently unveiled the T-Roc subcompact crossover in Europe, but, even though that segment is red hot in the U.S., VW brand bosses said the T-Roc may never be sold in this country. “There are other options that potentially fit better to the American market,” said Hinrich Woebcken, president and CEO of Volkswagen Group of America.

A five-seat version of the Atlas also is possible, Woebcken said. Production of the seven-seat Atlas, in Chattanooga, is currently running at about 400 per day, and VW has the capacity to double that. It also builds the Passat there, and VW execs did not rule out producing an electric vehicle in Tennessee as well.

Meanwhile, the German automaker is advancing further in areas such as electrification—with a sharp prod from regulators—and connected-vehicle technology. In California, VW is required to offer at least three all-electric vehicles by the end of 2020, including two all-electric SUVs, as part of settlements from its emissions cheating.  The automaker has agreed to sell those models in the state at least through 2025.

VW's Chattanooga plant

Last month in Pebble Beach, Volkswagen showed off the all-electric I.D. Buzz microbus, an homage to the old Grateful Dead–chasing vans of the 1960s. The I.D. Buzz won’t arrive until 2022. Matthias Erb, Volkswagen’s chief engineering officer and head of product strategy for North America, said that there is nostalgia among Volkswagen’s ranks for these kinds of off-kilter vehicles that connect with consumers—so a future with more “emotional” vehicles is part of VW’s strategy for the U.S. market.

Interestingly, both Diess and Erb named Tesla as an automaker they’re watching. “Tesla is going to become much more of a competitor for us,” Diess said while speaking about the Volkswagen’s own electrification strategy. Asked if there was anything specific about Tesla that Volkswagen would like to compete with, he said the young EV company has done a good job of making the passenger car a “key point in the internet,” with over-the-air updates, the capability to send and receive information from web-based cloud-storage systems, and the ability to improve its functionality during its life cycle. Volkswagen will add updatable technology as part of its new electric-vehicle architecture, starting in 2020 or 2021, according to Diess.

“So I think Tesla is challenging the industry in various ways,” he said. “And we have to take them very seriously.”

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