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Volkswagen rolls back EV-or-bust strategy that angered rivals (Bloomberg)

The following article is from Bloomberg Wire Service. The views and opinions expressed in this story come from the Bloomberg Wire Service and do not necessarily reflect the official policy or position of NADA.

Volkswagen AG’s all-in plan for electric vehicles is no longer valid.

The eponymous VW brand, which touted its ID family of electric cars as central to its future, admitted last week that it will need more plug-in hybrids as sales of electric vehicles decline.

This is just the latest adjustment VW has made to its electrification strategy after the company botched several model releases and fell behind in China, where local brands now dominate. The manufacturer has also shelved efforts to attract outside investors for its battery unit and scrapped plans for a €2 billion electric vehicle factory in Germany.

In fact, the automaker is selling so many cars that still run on internal combustion engines that it is on track to exceed its emissions limit next year, prompting Chief Executive Oliver Blume to ask European regulators for leniency. It’s a significant turnaround from just three years ago, when VW’s aggressive lobbying for electric vehicles in the European Union opened up divisions between the company and some of its competitors in the region.

VW had no choice but to embrace its electrification message after betting heavily on “clean” diesel engines. That bet unraveled when the company was caught cheating on emissions tests, forcing a hard switch to battery-powered vehicles. By 2019, then-CEO Herbert Diess announced plans to launch up to 75 all-electric models over the next decade.

His electric-car-or-bust strategy — Diess argued that automakers would have to change quickly if they wanted to survive — angered executives from Turin to Tokyo who wanted more time and flexibility to transition away from combustion cars. The CEO even praised what he saw as an early mover advantage.

Electromobility has “won the race,” said Diess when presenting VW’s battery strategy for 2021. “Many in the industry have questioned our approach. Today they follow suit while we reap the rewards.”

Although this haul wasn’t as big as VW had hoped, the company isn’t turning away from electric cars entirely.

Blume is partnering with companies like Xpeng Inc. and preparing a new electric vehicle brand in China. It offers models equipped with gadgets such as an in-car avatar to win back young consumers who have lost out to BYD Co. and Tesla Inc. VW has also been in talks with European counterparts including Renault SA about developing cheaper electric vehicles to attract mass-market car buyers.

VW isn’t alone in needing to recalibrate due to the EV slowdown. Countries like Germany and Sweden have stopped or cut subsidies for electric cars, which still tend to be more expensive than combustion engine vehicles, hurting the entire sector. Gaps in public charging networks also continue to deter potential buyers.

Stellantis NV said on Tuesday it would sell cars developed jointly with a Chinese partner in Europe from September to reduce the cost of its electric offerings. Mercedes-Benz Group AG has stopped developing underpinnings for new electric luxury sedans to save money and plans to sell gasoline-powered cars for longer than expected. BMW AG, which has had more success selling electric vehicles than its German rivals, nevertheless warned this week that the EU’s plan to effectively ban sales of new internal combustion engine vehicles by 2035 would hurt the industry. European regulators are expected to review the directive in 2026.

The slowdown has dealt a blow even to Tesla, which has lost $235 billion in market capitalization this year, more than three times VW’s current valuation. Nevertheless, CEO Elon Musk criticizes the regression of automobile manufacturers.

“The global adoption of electric vehicles is under pressure, and many other automakers are pulling away from electric vehicles and relying instead on plug-in hybrids,” Musk said last month when discussing Tesla’s first-quarter results. “We believe this is not the right strategy and electric vehicles will ultimately dominate the market.”

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