Thursday 31 January 2019

Volkswagen's plan to kill off Tesla.

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 Whenever a new electric car is unveiled, someone asks whether it is a “Tesla killer” as the Silicon Valley pioneer is still the company to beat on price, styling and battery power, despite the latest investor worries on sales.Volkswagen has been working on its Tesla killer since late 2015. But its proposed killer is not an electric car. It is the underlying chassis or platform, called MEB — the basic building block for 50 different models VW promises by 2025.Some investors and analysts think the VW chassis, which will be used for the majority of its electric vehicles, may give the German company a vital edge in the new era of battery-powered cars.“This platform is the heart and soul of everything Volkswagen is doing in the future for passenger cars,” said Johannes Buchmann, manager at FEV Consulting, an advisory group that focuses on cars.“It’s not just a design principle, a template for their new cars. It has an impact on the whole organisation, supply chain and manufacturing quality — pretty much everything.”Of all the traditional car groups, VW is taking the boldest gamble by spending €30bn on electric cars in the next five years alone. The crux of the investment is MEB, a “skateboard chassis” designed solely for electric vehicles, rather than a combustion engine platform modified to fit batteries.It is a make-or-break event meant to transform it into the world’s largest maker of electric cars as it aims to repeat its success in the combustion engine market, where it has sold more vehicles globally than any other company for four straight years.VW has built more than 50m cars since 2012 through its 12 brands, including Audi, Skoda and Seat, using its MQB combustion engine chassis.The company’s ambitions for its electric platform, however, are even greater. It hopes this chassis will become the industry standard in the way VHS once was for videotapes, according to two people familiar with the plan.The company is in talks over supplying the chassis with multiple carmakers. One is Ford, which confirmed this when it announced its “global alliance” with VW at the Detroit car show this month.For now, this partnership is centred on light commercial vehicles. But analysts at Barclays said it is “obvious” and would offer “substantial benefits” if the partnership extended to Ford building electric cars on VW’s chassis.This potentially represents a mould-breaking move as, until this decade, car producers sought to distinguish themselves from their rivals by developing their own powertrains, which comprises the engine, transmission and driveshafts of a vehicle.

 But in the emerging era of electric, internet-connected cars, batteries are expected to be commodified — the way they are for mobile phones — with the motorist likely to be more interested in a car’s electronic and infotainment features than its horsepower.“If you don’t have to spend so much money on architecture [the chassis], you could refocus your efforts on electronics, user experiences, and autonomous systems,” said Chris Borroni-Bird, a former GM and Waymo executive.Mr Borroni-Bird is credited with having invented the “skateboard chassis” in the early 2000s. It is what enabled Tesla, the Californian electric car pioneer, to house massive batteries weighing up to 600kg that provide more than 500km of driving range.The risks for VW of stacking so many chips on this one bet are legion. If the electric car does not become mainstream, VW will be sitting on billions in losses. If VW makes an error requiring a fix, the number of car recalls could be massive.Licensing the electric chassis to other carmakers is a way to mitigate the risks. If VW succeeds in this, the impact could be huge.One person familiar with the plan said VW could dominate the after-market for maintenance as its dealerships would control the market for spare parts and services if the electric chassis became the industry standard.Moreover, the electric chassis will connect to an electronic control unit that connects the car to VW’s Automotive Cloud, built in partnership with Microsoft, which enables its cars to “speak” to each other and download over-the-air services.This new IT infrastructure will be open to third-party apps, much like the Apple Store or Google Play, creating a ‘Shopping Mall’ for new digital services, according to VW chief operating officer Ralf Brandstätter.Tara Prakriya, general manager in Microsoft’s connected vehicles division, said: “MEB is a full-fledged platform, it’s not just hardware . . . nothing is just hardware any more.”So far, making the electric chassis ready for the market launch has been a slow-and-steady process. But once it is up and running this year, VW plans to ramp up production at a fast pace. Eight factories on three continents are scheduled to use the platform by 2022. The 12-brand group sold a paltry 40,000 electric cars in 2018, but by 2025 it aims to be selling as many as 3m — a quarter of its projected global production.The vehicles built on the electric chassis are also expected to be profitable by 2021 at the latest. One person familiar with the strategy said VW has cut the number of hours needed to build cars on the platform dramatically, achieving savings of 35 per cent in production costs. This person said VW’s combustion-engine cars take between 26 and 32 hours to build, but a vehicle built on the electric chassis needs only 16 hours.The goal is to reduce this further to just 10 hours within a few years. That would enable VW to launch a low-end electric model as early as 2023, costing just €18,000 — one-third of the €55,000 starting price for a Tesla Model 3 in Germany today.“It would be like an electric T-Roc,” this person said, referring to the company’s compact sport utility vehicle. “To reach €18,000 — we must build this car in 10 hours.”

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