Volkswagen late to the party in post-crisis bounce-back

Douglas Gillison, Agence France-Presse

Posted at Jan 10 2017 02:12 PM

Volkswagen's electric ID Buzz concept vehicle is displayed during the North American International Auto Show in Detroit, Michigan, U.S., January 9, 2017. Brendan McDermid, Reuters

DETORIT - Embattled German auto maker Volkswagen announced another step toward its corporate transformation on Monday, unveiling a new fully electric, autonomous prototype bus to join a coming family of electrified vehicles.

The reimagining of the iconic VW "hippy bus" popular in the 1960s and 1970s is expected to hit the roads at some point after 2020. 

The plug-in concept van called the ID Buzz "stands for the new Volkswagen," Herbert Diess, head of the division which produces VW's namesake cars, announced at the start of the Detroit auto show. 

The van, a sleeker more futuristic version of the 20th century relative, embodies what Volkswagen aims to be: "modern, positive, emotional, future-oriented," he said.

But auto industry analysts say questions hang over the company's efforts to reinvent itself after the emissions scandal known as "dieselgate" that involved one of the largest US consumer class action cases ever and eroded the company's reputation.

Under a corporate plan announced in November, the company hopes to charge headlong into the already crowded American SUV market, develop new ride-hailing and digital technologies and begin producing millions of electric and hybrid cars over the next decade -- all sectors in which competitors have had lengthy head starts.

Jack Nerad, executive market analyst at Kelley Blue Book, said the VW plan, dubbed "Transform 2025+," seemed to have less to do with the company's bottom line than it did with healing the blight on its reputation.

"It almost strikes me as a public relations ploy versus an actual business strategy, something to take people's minds off of what was so bad," he told AFP.

Volkswagen shocked the world in 2015 when it admitted to deliberately configuring software on 11 million diesel cars worldwide to defeat pollution tests while emitting up to 40 times the permissible levels of harmful nitrogen oxide during actual driving.

On the eve of the auto show, federal police arrested a VW executive in Miami on charges in the emissions scandal. He was due to appear in court Monday on charges of lying to federal regulators investigating the case.

CHANGING 'RADICALLY'

Volkswagen, which also produces the luxury Audi and Porsche brands, already reached agreements to fix or replace all the models sold in the US that had the defeat software, for a total of about $16 billion, including funds for environmental cleanup in California.

The company also is nearing a $2 billion settlement with US authorities to resolve the criminal probe, The New York Times reported Friday, citing people familiar with the negotiations.

Just over a year after the scandal broke, Diess unveiled the three-pronged plan in which he said the company's namesake line of cars would "change radically."

"Very few things will stay as they are," he announced in November.

Speaking to reporters in Detroit on Sunday evening, Diess said Volkswagen's move into new markets was well timed.

"We will have our major offensive in the 2020 when we think EVs will get in to volume," he said, referring to electrified vehicles. "We have a very good stronghold in China where we have probably the main market for EVs. They will be strong."

In turning over a new leaf, however, Volkswagen appears to be late to the party.

While VW-branded cars have long had only a sliver of the US market at around two percent, competitors have seen record US sales driven by consumer demand for SUVs and light trucks, which made up nearly two-thirds of sales in 2016. VW's US sales declined 7.6 percent last year to just under 323,000 units. 

And other players have long been in the race to produce mass-market, purely electric vehicles, including Chevrolet and Tesla, which are launching models in the US this year priced around $30,000.

While growing fast, the US market for hybrid and battery-electric vehicles is still very small, estimated at just under three percent in 2016, according to LMC Automotive. 

SHORT MEMORIES

"I don't see the market going to electrics nearly as fast as they think it could or will, certainly not in North America," Nerad of Kelley Blue Book said. "In North America, they haven't been a strong player for a long, long time anyway."

IHS Markit said last month that electrified vehicle sales might not reach 35 percent of the global market before 2040.

Sandy Schwartz, president of the Cox Automotive consultancy, said the US market still holds prospects for a turnaround for Volkswagen.

"I think people have a short memory. If they produce great cars, if they can really produce products that people want, they'll get this part behind them," he told AFP.

"I think there's a chance they could reemerge but it is not going to happen in a year or two. This is going to take time before they get this behind them."

© 1994-2017 Agence France-Presse