Volkswagen's changing product philosophy

Jens feels that diesel scandal has been grossly mismanaged by VW, and that their single-minded focus on EVs at the expense of the rest of their portfolio poses an even greater risk going forward.

If you needed any further evidence that the industry is in turmoil, it was provided by Volkswagen chief Matthias Müller in an interview with the German business newspaper Handelsblatt last month. It may be the signal to a profound tide change – or just a sign of a deep insecurity in the face of conflicting social and political forces.

We’ve all watched with dismay the unprofessional handling of the escalating diesel scandal and the subsequent self-decapitation of the Volkswagen Group. The minds behind VW’s incredible surge over the past few decades were unceremoniously asked to leave. Martin Winterkorn, Ulrich Hackenberg and Heinz-Jakob Neuser have left. Wolfgang Hatz – unbelievably – is in jail, and Ferdinand Piech has been sidelined and has entirely lost his position of absolute authority.

One fear has come true – VW has abandoned its ambition to make premium cars. The brand now aims to be ‘top of the volume segment’ – a position that is equally claimed by a number of other brands such as Ford or Hyundai. And it shows. Cars like the new T-Roc, with their decidedly average material quality, would not have passed the test of Ferdinand Piech. At least they’re still extremely competent drivers, thanks to the architecture developed under Hackenberg.

Now back to Müller. A former Audi guy and Porsche CEO, he tells Handelsblatt that the ‘subsidies’ for the diesel engine in its German home market need to go. And that the money should instead be shoved into electrics.

To add some background, the claim that diesel is ‘subsidised’ is a fairy tale peddled by its enemies, while electrics already enjoy a huge political tailwind and plethora of subsidies, such as a tax waiver, convenient dedicated parking spots, a 4,000 Euro cash subsidy and more. It’s tough to envision a more favourable climate for electrics, but Müller, whose company has so thoroughly discredited the diesel, says that’s not enough.

He then proceeds to dismiss an essential part of German automotive heritage – the Autobahn, with its unlimited velocity, revered by car enthusiasts around the world and arguably the reason why German cars still enjoy the aura of technological superiority. After all, they are designed to withstand hours of top-speed driving.

But Müller, without being pressed by his interviewers, volunteers that he can ‘imagine that there will be a speed limit eventually’, adding that ‘in fact, it’s already present’ on a lot of stretches. Go and tell that to your US customers, where you sell the GTI with an ‘Autobahn Package.’

My explanation is that, in the face of growing realism and criticism of the EV hype, VW must be desperate to recover the investment on electrics. But it won’t work, and it’s a bad idea to take down the rest of their portfolio along with it.