It’s not often that Volkswagen outsmarts its US competitor Tesla. Under CEO Oliver Blume, Germany’s largest car manufacturer has now succeeded in doing just that. VW has presented a small electric car for less than 25,000 euros. Before Tesla. And this despite the fact that Blume – unlike his predecessor Herbert Diess – publicly avoids comparison with the US competitor. You should still enjoy the stage win in Wolfsburg in silence.
VW’s ID.2 is still a show car, you can’t buy such concept cars yet. Nevertheless, VW is willing to finally offer an affordable electric car for the masses by the middle of the decade. And there are no major alternatives for the traditional brand if VW wants to exit the combustion engine business in Europe by 2033, as planned.
But there is still a long way to go: recently, just 330,000 electric cars were sold worldwide under the VW logo. That was not even every 14th car sold by the VW brand.
But as is the case when you have to put a lot on one card, the height of failure is all the greater. And in fact, VW’s small electric car bet carries three major risks.
First: 25,000 euros is still a lot of money for most customers
Combustion engines are still cheaper than electric cars, especially in the small car segment. A Polo with the cheapest equipment currently costs a good 20,000 euros, which is 5,000 euros less than the small Stromer now presented by VW.
If you are looking for a reliable small car and you have to watch out for money – which can certainly be assumed in this segment – the combustion engine will probably be an alternative for quite a while.
Second: When it comes to small electric cars, looking to Europe is too short-sighted
The big business in the segment is mainly expected in China. From what you hear, the ID.2 will not initially be offered there. Instead, VW is focusing on its most important market for entry-level models on smaller sedans and SUVs below the mid-range electric car ID.4, as China boss Ralf Brandstätter recently emphasized.
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However, the price of such models is likely to be significantly higher than what Chinese suppliers such as BYD or Great Wall are already offering very successfully in their home market in the small electric car segment. The result: VW loses touch with its most important sales market.
Third, small cars don’t bring big margins – and they never will
That is the reason why Germany’s car manufacturers have recently increasingly relied on SUVs and other large calibers – and small models have sometimes fallen victim to the cutbacks. Unlike Mercedes or BMW, however, Volkswagen literally has a name to lose when it comes to price.
Electric mobility for less than 20,000 euros.
(Photo: BYD)
This also explains why the group is announcing a Stromer, which should cost below the 25,000 euro threshold, in times of a shortage of parts and record inflation.
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What is initially a good signal for customers is likely to be fatal for profitability. And this is where the VW brand currently has its biggest problem. The return on sales should have been six percent for a long time, but this goal has now been postponed to 2024. The ID.2 is unlikely to help to reach the threshold. Other volume manufacturers such as Stellantis have a better grip on the margin than VW.
All of this – together with increased raw material prices – could ultimately mean that VW cannot keep the price promise of 25,000 euros for the ID.2 for long. There was something similar with the ID.3 before. At that time, the magic sound barrier was 30,000 euros. The model in the configurator currently costs just under 44,000 euros.
More: VW vs. Tesla – The fight for affordable e-cars starts with a problem.