Volkswagen AG is unwrapping not just new models at the Frankfurt car show, but also a tweaked logo as the world’s biggest carmaker ushers in the electric era.
Little-changed since World War II, the new VW emblem will be uncovered atop its headquarters in Wolfsburg on Monday. Then later in Frankfurt, the manufacturer will unveil the VW brand’s electric-powered ID.3, the first model in an unprecedented $33 billion push to make battery-powered vehicles for the masses.
The twin steps — both heavy with symbolism — reflect the high stakes involved in Volkswagen’s ambitions of becoming the world’s electric-car leader just four years after the diesel-cheating scandal plunged it into the worst crisis in its history. The carmaker aims for ID.3 hatchback to become a trendsetter and take on similar status as its iconic Beetle.
“VW’s bold electric vehicle plans scare this analyst given their huge near-term costs and uncertain demand,” Max Warburton, a London-based analyst with Sanford C. Bernstein, said in a note. Former patriarch Ferdinand Piech, who died two weeks ago, “would have argued that expensive investments in new technology tend to pay off in the very long-run.”
If things work out as planned, the ID.3’s technical underpinnings, dubbed MEB, are set to emerge as a new industrial standard for battery-powered cars, which would give Volkswagen economies of scale that rivals would struggle to match. U.S. peer Ford Motor Co. has already agreed to use the technology for a high-volume car in Europe and is considering adding a second model.
But if consumers remain on the fence about the cars because of range, charging and cost concerns, VW could find itself stuck with sunk costs, redundant factories and excess workers.
The time for VW’s effort to reinvent itself is hardly favorable. A decade of almost uninterrupted growth for the industry — fueled mainly by China — has come to a grinding halt. Global demand for new vehicles contracted last year. The trade war between U.S. and China and uncertainty over Brexit is serving up yet more challenges.
VW is tapping the brakes already, even as it still generates vast amounts of cash and profits. The manufacturer has scaled down production plans by some 450,000 cars for this year and has pledged to lower output further if necessary. VW’s cut roughly equals the annual output of one its 122 factories worldwide and exceeds Tesla Inc.’s delivery target for 2019 of between 360,000 and 400,000 cars.
Separately, the German giant started to make gradual progress toward untangling its unwieldy corporate structure. It regrouped its car brands to focus on luxury cars and mass-market vehicles and after some back-and-forth eventually completed a public listing of trucks unit Traton SE earlier this year.
In May, VW announced plans to review strategic options including a possible sale of the industrial machinery units Renk AG and MAN Energy Solutions. Analysts have urged VW to consider deeper changes including an initial public offering of the high-margin Porsche brand to unlock value. The sports car unit, VW group’s most profitable division, will show off the electric Taycan at the Frankfurt auto show after unveiling it last week.
Despite these efforts, investors are doubting VW and other carmakers’ ability to master the technological shift toward electric and self-driving cars. Chief Executive Officer Herbert Diess has stressed the importance of reviving VW’s weak market value to help bolster the company’s case for acquisitions and partnerships.