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Volkswagen announced yesterday that its pool for European emissions calculations narrowly missed compliance by 0.5 g/km. At first glance, it’s a bad look for the company that promised to bet the most heavily on electrification and was the only one to launch a dedicated battery electric vehicle (BEV) platform.
That same day, Volkswagen’s CEO Herbert Diess made his inaugural tweet and tried to capture the twitter charisma of a certain other auto CEO:
In all fairness, I’m sure the language barrier contributed a fair amount to the “how do you do, fellow kids?” vibe here. Still, it’s somewhat dishonest to claim the electric crown on your home turf, where you have some 20% market share, and Tesla hasn’t finished building its first domestic plant in your backyard. The Twitter reception was lukewarm at best, with many pointing out VW’s non-compliance and pending fine. Others took issue with their reliance on sales of plug-in hybrid electric vehicles (PHEVs) to bring down the fleet average; PHEVs score favorably in measured emissions tests but are higher emitters in practice as drivers often don’t charge the batteries.
The optics of VW’s noncompliance, and the unfortunate distinction of being the one noncompliant European OEM, are not great. But the criticism is somewhat misplaced - I actually think that VW has the best electrification strategy of its peers. The disclosure requirements around emissions testing and sales by powertrain type are poor, but what we know from the different OEMs are:
BMW achieved fleet CO2 emissions “under 100 g/km” and electrified (PHEV+BEV) sales were 15% of total European sales. The company further disclosed that PHEV sales grew 40% and BEV sales grew 13%.
Daimler’s Mercedes-Benz Cars (with the least transparent disclosures) delivered 27k BEVs and 115k PHEVs globally out of 2,203k global unit sales. Sales of PHEVs quadrupled while BEV sales grew 46%.
Volkswagen achieved fleet CO2 emissions of 99.8 g/km with electrified cars making up 9.7% of sales in Europe. The VW brand alone delivered 134k BEVs, accounting for 4.1% of European deliveries.
While not apples-to-apples, it’s apparent that BMW and Daimler relied more heavily on PHEVs to achieve compliance and that BMW’s fleet emissions were probably close to Volkswagen’s 99.8 g/km. VW’s lower electrified vehicle penetration (9.7%) versus BMW (15%) indicates that they sold a higher proportion of BEV cars (which emit 0 g/km of CO2).
So, what happened? The company notes that the VW brand and Audi brand, where Volkswagen launched its ID.3 and e-tron electric models, overfulfilled their CO2 fleet targets. That was by design, and I suspect the VW brand didn’t overfulfill enough due to software issues that held up deliveries of the ID.3 through the first half of 2020. The ID.3 is the first car where VW in-housed software development itself – Diess is copying Musk in more places than Twitter – and there were bound to be some stumbles as the OEM tries to build its competencies in technology and innovation. That doesn’t mean it’s the wrong approach. Because of electrification, innovation is playing a greater role in competition between automakers. VW may have a bruised ego this year, but its willingness to embrace innovation with a BEV focused electrification strategy and in-housing software development is a head start over peers who are currently stalling with a PHEV focused strategy.
BMW and Daimler are likely safe for the next few years, but they will have to figure out BEVs. Emissions restrictions will tighten again in 2025, though Europe may hit the tipping point for BEV penetration before then. The difference is that when they do take an earnest shot at electric cars, Tesla won’t be the only serious competition.