EV ambitions of VW and Mercedes run into trouble

EV ambitions of VW and Mercedes run into trouble

Automotive News Europe — 2022-11-20

Automotive Industry

The German car industry's bid to take the electric-vehicle crown from Tesla veered off course this week with stumbles for Volkswagen and Mercedes-Benz.

VW plans to delay its key Trinity flagship EV project by at least two years after software fumbles, according to a person familiar with the situation, calling into question its ambitious €52b ($54b) EV rollout touted as the industry's biggest. Also, Mercedes cut prices on its flagship EQS EV in China by about $33,000 after misjudging the market.

The developments are a red flag for the industry that is pouring unprecedented funds into the transition with ambitious timelines. While automakers the world over grapple with the switch away from combustion engines, the stakes are highest for Germany's manufacturers accustomed to commanding a premium based on cutting edge technology and luxurious trims.

"German automakers have announced bold electrification targets and claim they are leading the transition, but they are not yet delivering," said Bloomberg Intelligence's Michael Dean. "They still have a long way to go."

After years of failed attempts to displace Tesla and with Chinese upstarts prepping their own moves, German automakers have switched gears to win the EV race, moving away from making incremental changes to their combustion-engine cars that have dominated for decades.

BMW, Mercedes and VW are pouring more than €100b into scaling up an entirely new infrastructure of platforms, battery plants and software to deliver a new generation of EVs. The hope is that these will lead on driving range as well as digital offerings that tap new sources of revenue and shut out tech rivals.

"From a hardware perspective I would have no doubts that they can make superb cars," said Axel Schmidt, global head of the automotive division at management consultancy firm Accenture. "But can the complexity and quality needed for the software be mastered by a 120-year-old hardware manufacture? I am not so sure." VW could be forced to invest more in its MEB platform that underpins its ID all-electric cars such as the ID4, shown.

The latest developments show how VW Group is reevaluating the strategies set out by former CEO Herbert Diess, who was replaced in September with Porsche head Oliver Blume after a number of setbacks.

For Mercedes, the struggles with its top-of-the-line EV model in China is a delicate development as it plans to go electric-only where possible by 2030 while shifting its portfolio upmarket.

At VW, the fallout could also be far-reaching. Should the delay of the Trinity battery car project beyond the original 2026 be confirmed, the automaker may also scrap plans for a €2b in Germany. It would also mean the VW brand loses a chance to close the technology gap with Tesla, especially on automated driving features.