Volkswagen is coming for Tesla. Here’s how they plan to dominate the US market

Today, the company is striving to take the top spot. Volkswagen will say goodbye to the internal combustion engine and phase out all gasoline vehicles from its US lineup over the next decade. From then on, it will only sell electric cars.
The company plans to spend over $7 billion over the next five years to expand its research and development and manufacturing capabilities in North America. Its new battery engineering lab in Chattanooga, Tennessee begins operations in May.
Volkswagen officials say they see an opening in the North American market and are ready to accept it, to hell with geopolitical and inflationary headwinds.
Volkswagen Group of America CEO and President Scott Keogh spoke to CNN Business’ Nicole Goodkind about the automotive landscape while unveiling the new VW Bus-inspired ID.Buzz electric minivan at the week’s New York International Auto Show. last.

This interview has been condensed and edited for clarity.

Volkswagen is making a big push in North America, looking at the automotive landscape here – where do you fit in?

Keogh: Our competitors are Subaru, Toyota and Honda, the main imports. Historically we’ve been there, but we got lost in the desert for a long time, but we’re back and that’s where we belong.

What about your electric vehicles?

Keogh: Electrification is our chance to jump the line a bit. We invested early in electrification, we have set up factories and we can accelerate now. This is the chance of a lifetime for us. I always admired Elon Musk and Tesla, he said “make a cool car and good things happen”. People don’t buy electric vehicles because they want to feel good or because they want to help society, most of them just want to buy a cool car. I think Elon Musk did that, and he did it, and you have to admire him. We take that cool car factor and expand it, the Volkswagen way.

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What are some of the issues Volkswagen is facing in the US?

Keogh: We were irrelevant and unappreciated.

We were late for SUVs, we mainly sold European cars and we missed it. The second thing is the TDI fiasco [in 2017, a federal judge ordered Volkswagen to pay a $2.8 billion criminal fine for “rigging diesel-powered vehicles to cheat on government emissions tests.”] who made us unloved and hated. We have worked hard to rectify this.

We have gone from 14% of our cars being SUVs to 70%, we are becoming more relevant and these vehicles are making us more appreciated. We are profitable for the first time in decades.

How have supply chain issues affected your automotive supply?

Keogh: The way this industry used to be was you had a hundred day supply of cars in the lot and spent 10% to 12% of the manufacturer’s suggested retail price. [MSRP] discounts on these cars. Consumers would race between six and seven dealers in search of the lowest price. It was a massive way to destroy value. Today, due to supply chain challenges, we have less than 10 days supply of cars in the field and you spend nothing of the MSRP on incentives. It’s a massive structural change and a lot of things are good.

But is it temporary?

Keogh: More supply will come, but I honestly believe there is no way it will come back. There are structural changes that need to be made in terms of increasing semiconductor production and it will be years and years and years before we have an adequate supply. Cars that had hundreds of chips now have over 5000 semiconductors due to added consumer electronics. I don’t see this shortage being resolved anytime soon, and that’s assuming the world is going to stay normal, or just semi-chaotic.

So how do you deal with metal shortages, the nickel and lithium needed to power your batteries?

Keogh: From a strategic point of view, there is only one choice. The automobile industry was previously vertically integrated at all levels. Then Wall Street stepped in and said “we just want you to have the maximum margin”, and then whole chunks of the industry were outsourced. It was wonderful for us, we sat in our factory and things happened. Now things are reversing, and on things like semiconductors and batteries, we have to go much further.

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So you see the US manufacturing landscape changing?

Keogh: The advantage is that everything will happen locally in the United States, because it is too expensive and too risky to ship tons of cobalt and lithium across the ocean. It takes America back to the days when we said we wanted to be Apple and not Foxconn – we were going to focus on the design, engineering and software work, but someone else would make the product. It’s not going to be possible with batteries, you can’t ship something that weighs a few thousand pounds for 15 million cars from China, it’s going to be a transformation.

Is de-globalization a trend that is here to stay?

Keogh: Oh, 100%. Look what we did at Volkswagen. Our shortcomings, in my opinion, were that we were a sales and marketing entity that sold German vehicles. Today, we are a fully industrialized company with its own factories and its own purchasing department. Approximately 92% of the vehicles we sell in the United States are manufactured at our factories in Mexico and Tennessee, and 85% of the materials in the car are sourced from local US suppliers. This reduces the risk of many potential logistical issues for us.

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How do you find people to work on your battery technology? Are you having difficulty recruiting staff?

Keogh: We are working with Tennessee Governor Bill Lee to introduce more technical training around our Chattanooga plant. I think some of the shortcomings of the American system revolve around college and debt, but there are other ways to look at a career and we’ve had decent success on that front. A big challenge in America right now is that we’ve moved to such a service economy. But if you want to look at your industrialization, we’re making maybe half a million batteries in America right now, we’re going to have to make nine million batteries. That’s hundreds of factories, and bringing talent in there, to the factories, will be transformational.


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