Volkswagen AG shares opened down 20% this morning after last Friday’s shocking EPA letter/press release announcing an EPA recall of 482,000 “clean” diesel TDI engined vehicles manufatured between 2009 and 2015. The only thing similar in auto history might be GM’s announcement of pending bankruptcy in 2009. The drop in stock price represents an over $15 billion spanking to shareholder value and indeed, at market open panicked selling reached -23% before some slight recovery ensued.
Basically, VW was caught red-handed gaming the emissions test system. The firmware in their engine control unit would dramatically reduce fuel flow during emissions tests, and restore it once returned to normal road operation. As a result, the cars put out 15 to 40 times greater nitrous oxide levels on the road than they did under emissions testing.
Ironically, this essentially criminal activity was discovered by the International Council on Clean Transportation (ICCT) while it was trying to prove how very CLEAN diesel technology had become. They found the VW/Audi TDI engined vehicles unbelievably higher in emissions than they tested at. Rumor control central would have us believe that they mentioned this to a U.S. Automaker who then of course gleefully tipped the EPA to it. Further testing was done and what the EPA describes as a “software switch” was detected.
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This morning, VW chairman Dr. Martin Winterkorn is apologizing to anyone who will listen in terms we’ve never heard from an auto executive before. The timing is too exquisite as the the VW supervisory board was already scheduled to take up the issue of renewing his contract this week. And the incident is sufficiently embarassing that I would say firing Wintercorn will be just the beginning of the carnage.
VW has struggled to capture U.S. market share and the clean diesel was their main spearhead in the effort. Over 20% of their new car sales in the U.S. are diesel.
We’ve panned the company unmercifully on the electric car front for issuing hundreds of press releases over the past five years detailing electric car plans that never actually result in any rolling hardware to speak of. The eGolf is the only model really available in the U.S. in microscopic numbers.
But finally they appeared to be taking a bit of aim with the introduction of the “sporty” electric SUV called the E-Tron Quattro concept. This battery electric SUV with 311 mile range would appear to be a direct hit on the Tesla Model X, which begins shipments September 29. Unfortunately, the E-Tron Quattro is scheduled for introduction in early 2018.
The EPA announcement, which left little wiggle room, essentially destroys VW’s “green cred” reputation as a clean car maker. In addition to the $15 billion stock hit, costs to recall and fix 482,000 vehicles could approach $35,000 per vehicle by some estimates. This is just under $17 billion. And there remains the possibility of record setting fines and even criminal prosecution of VW executives.
AFTER they get all that sorted out, VW basically comes out of all this with the reputation of being the dirtiest most climate hostile automaker on the planet. How do you fix that?
As always, I have some thoughts freely available for them to studiously ignore (at their peril).
First, get with the electric car game. Redefine VW as an electric car company. Shitcan the whole diesel gig. It isn’t working for you. They have tons of electric car designs at hand and one of the greatest engineering teams in Europe. They COULD do it.
But they are badly behind. Unfortunately, the Audi E-Tron Quattro is scheduled for introduction in early 2018. Nothing like introducing a car that is almost as good as the Tesla Model X – two years later.
Worse, there is a hugish problem with the Audi E-Tron. Yes, it has a 95 kWh battery pack, assuming LGChem can deliver on their so far mythical new battery. How do you fill it?
Tesla has over 500 charging stations and at least 2500 charging stalls on the ground now and they are putting in 3 per week.
Now let’s take our Model X and our E-Tron and hook them up with two reporters in San Francisco. Let’s race to New York City.
The Tesla can stop at any point more or less 80 miles apart along the way for a nearly full recharge in 30 minutes. VW has allied with the SAE standard, which in addition to not precisely existing with actual charge stations anywhere in the U.S., can barely do 50kW as it stands now. It would take 2 hours to recharge IF there were stations by 2018.
This is why I thought all automakers would kiss the ring and take a knee two years ago on announcment of the Tesla fast charging network. While they hem and haw, Tesla builds out this charging network which is actually the KEY competitive advantage in the e-car space. Neither the financial community nor the automotive industry has quite picked up on this extremely basic and extremely obvious point.
I can drive my Model S anywhere in the country I want NOW. And my fuel costs are ZERO. ALL other electric cars, actually even including the Tesla Roadster, CANNOT. In all value proposition comparisons, car X loses to Tesla – not some portion. But 100% of the time.
Audi/VW has to come up with an answer to this or get massacred in the marketplace. Nissan can sell Leaf’s without this. But they aren’t really competing with Tesla. They’re selling a local errand 2nd car for cheap. They don’t need to drive across country. But if you intend to introduce a luxury car on par with TEsla (Audi/Porsche/BMW) you will address this issue or watch hopelessly as you sell essentially ZERO cars into this market.
Two years ago, Musk left the door open to cooperating with other automakers on the charging network. At this late point, I think he would be hard pressed to honor that notion. First the Tesloids would go CRAZY if they had to wait for an Audi to finish charging before they could charge their brand new Model X. Second, it truly is a competitive advantage. Why would he give it up?
There IS a seam in the zone here that VW could explore. Musk also said he would not pursue litigation of patents – even going so far as to describe Tesla patents as “open source.”
What if Audi pulled an EVTV and reverse engineered the charging system of the Tesla charging network. Simply outfitted their cars to do the same CAN exchange and installed the same connectors and the same 120kw (150kw would be better) charging structure.
I know what you are thinking, they would be STEALING electricity from Tesla. Hardly a good clean cred public relations move. And anyway, Tesla does use VIN numbers in their charging protocol so they could just not charge the cars.
But that’s not what I am suggesting. I’m suggesting that VW build out their OWN charging network. A network compatible with the Tesla charging network.
A couple of reasons. Picture VW building a national U.S. network (Europe too of course) of 500 charge locations using essentially the stolen TEsla technology. True Tesla uses VIN numbers to validate charging. BUT VW DOESN’T HAVE TO. They can simply charge all comers that comply with the spec. INCLUDING ALL TESLA MODEL S AND MODEL X cars.
Let that sink in.
Now picture a Bavarian Castle on Interstate 70 with a big VW logo on it. Huge solar installation with batteries. 16 charge stalls. AND, (I’m never going to give this up) the most upscale convenience store on the planet. Starbucks coffee. Pita pockets. Vitamin water. Big Gulps. Ho-ho’s. Funyums. And here’s the hidden key I’ve never revealed.
Take a survey of the wives. Ask any woman. 100% of them are actually HORRIFIED at the thought of using a convenience store restroom on the road. They’d rather hold it for 700 miles. This is an American female secret. They would sooner pee in a beer bottle in the back of a dump truck full of polecats going 80 mph down a washboard gravel road than to SET FOOT in a convenience store restroom. I literally mean they don’t want to stand in the middle of the room – much less actually USE it.
To find out why, simply visit one.
Now go ask your wife if what I’m saying is spot freakin on the mark, or if I err. I COULD of course be wrong. Side bet?
So put a country club style locker room in the VW Castle for the femme fatales. With an attendant that keeps it scrupulously clean.
Of course, I would price the Funyums and Cheese Goldfish perhaps a tad higher than you find in most convenience stores. Perhaps a sushi bar to restore America’s penchant for gas station sushi.
The hard truth is, convenience stores are among the most profitable businesses in the WORLD. More American millionaires are made in the gas station convenience store world than ANY other industry including software, real estate, and the Internet.
Now picture VW with a worldwide network of very profitable SOLAR electric car charging station convenience stores with what’s his names Solar Roadways panels paving them and solar panels all over the place in a Bavarian castle motif with country club restrooms and gas station sushi – and the best coffee in the world.
Sounds expensive? Indeed, I’ve actually read financial pundits who should know better note the squaderous spendthrift Elon Musk throwing over a billion into this stupid charge network. SEC filings, publicly available to anyone who can read at the Catholic fourth-grade level, which kind of defines the educational attainment of your typical college educated Democrat, would indicate about $163 million total investment so far. As there is a time lag, I’ll go $200 million.
Assuming a lavish $3 million budget for each of these charge locations, and 500 of them, you really ARE looking at $1.5 billion. That’s 10% of what VW lost THIS MORNING.
Now how can Tesla complain about this. It actually EXTENDS the charging network for THEIR cars. In the end game, they kind of have to reciprocate. And suddenly there are 1000 charge locations at 150kW.
Indeed, even on proposal, if I went to Tesla and asked to buy the charge station hardware, the batteries, and the Solar installation from Solar City, from the beginning, what do you imagine the response would be?
And there’s your deal. Charging on the Tesloids network, using Tesla technology, with an agreement to build 500 charging locations over four years, with Tesla providing the lion’s share of the equipment. But as VW branded, clean solar electric – very visible to every woman in the country with a bladder. They’ll be stopping there in gas powered Cadillac Escalades just for the washroom.
Meanwhile dust off the 120 VW electric car press releases you’ve issued over the last six years, and try to envision any of them actually being manufactured. It’s hard to get busted on an emission test if you don’t have to take one.
Michael Horn is the president and CEO of Volkswagen Group of America (VWGOA) as well as president for the Volkswagen of America brand. Horn assumed this position in January 2014. Assuming you survive the pogrom and remain orange-free in your fashion choices, give me a call. We’ll do lunch. Maybe get liquored up, play with some high voltage, and go for a drive.