Inflation complicates the plans of the Volkswagen Group with the electric ones in Europe

  • The Volkswagen Group wants access to its range of urban electric cars that it will launch in 2025 to be between 20,000 and 25,000 euros.

  • From Volkswagen they admit that the objective is still realistic but that if inflation continues or rises, their electric futures could be more expensive.

The development and production of family of electric and urban cars of Volkswagen Group It is probably the most important project that Seat and Cupra have faced in recent years. Both are responsible for the development of the platform, a variation of the architecture SEM for electric cars for use in small vehicles, and will be responsible for their production, which will take place in Martorell -PERTE through- from 2025. This family of electric urban cars is key and must reach the market to democratize electrification, with prices around €20,000. However, inflation threatens the plans of the Volkswagen Group.volkswagen hopes that these urban electric vehicles, one of Skodaanother of volkswagen -that many already call ID two– and another of cupra, which will derive from the UrbanRebel, boost sales of electric cars thanks to their price range. It is expected that the Skoda be the cheapest and, together with volkswagenare between the 20,000 and 25,000 euros. the of cupradue to its premium and sporty approach, will surely be more expensive and will crown this range of small plug-in vehicles.

However, from the Volkswagen Group They admit that this price target could be complicated by inflation. Werner Tietz, executive vice president of research and development for Seat and Cupra, admitted that the group is still confident of achieving these prices, but that “7% inflation could be a problem.” According to Eurostatthe expected inflation for the eurozone in May is 8.1%rising from the 7.4% of April.

The keys to reduce your price

The main asset to reduce the price of cars and allow electric vehicles to be offered below the €25,000 is the scalability of the platform SEM, which allows to reduce development and production costs, as well as the multiple components, including the battery, which will be shared between the three vehicles. That the development of these cars is being carried out by cupra Y seats in Spain and that they occur in Martorellwhere production costs are lower than in Germany -where it occurs, for example, the Cupra Born– are considerations that play in favor of lowering its price. The battery plant Saguntfrom 2026could help further reduce the price of cars by allowing the group to produce its own batteries.

Inflation, however, can ruin all this because the price of raw materials and energy has skyrocketed and threatens to inflate the price of vehicles so that the impact of this phenomenon falls on the buyer and not on the the manufacturer. BloombergNEF, the agency’s research division Bloomberg, recently anticipated that the prices of lithiumthe cobalt and the nickelkey materials for battery production, rose last year for the first time in more than a decade, making batteries more expensive by 2022 also for the first time in more than 10 years. Like the Volkswagen Group, BNEF warns that if inflation rises or stays the same, the match between electric and combustion cars could be much further than expected.

More collaboration to reduce costs

Projects such as the family of electric urban cars, in which one brand is responsible for the development and production of vehicles for the rest of the group’s brands, will be increasingly common within the Volkswagen Group. In fact, it will be this strategy of cooperation, says Thomas Schaferdirector of operations at Volkswagen and responsible for its generalist brands, which should improve the profitability of the consortium’s volume brands.

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the same Schafer admitted to Automobilwoche that “we are well positioned to meet the objectives of the brands, but there is a lot of potential to exploit & rdquor ;. Although the group’s brands share technologies, engines and other elements, the manager believes that “they are still very independent, something that is not bad, but we want more cooperation.” “In the future, we will define group objectives and not for brands & rdquor ;, he added before giving the example of seats Y cuprawhich are responsible for the development and production of the consortium’s entire family of urban electric cars, Skodawhich is leading the development of the new volkswagen passat and of the new Skoda Superbwhich will occur together in bratislava. “We have seen that projects like these work with the right people and the right structures & rdquor ;, she explained.

These joint projects make it possible to reduce development and production costs, increasing the profit margin per unit, one of the objectives of the Volkswagen Group for the next few years, in which it will drastically cut its offer to focus on selling more profitable models focusing on electrification. “The main objective is not growth in the market, but in the quality and the margins before in volume and market share & rdquor ;, said Arno Antlitz, the group’s chief financial officer, in April. The Volkswagen Group is preparing to take a definitive step in its electrification with the launch of a range accessible to almost everyone created under new cooperation standards that will, from now on, be the norm to guarantee maximum profitability.

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