VW Is Giving Up On People’s Cars

Youths look on in wonder at a high-market VW engine in the early 2000s.

Nearly 20 years after Volkswagen introduced the Phaeton to a resounding “huh?” from the buying public, VW is once again doubling down on premium models offering higher profit margins than the cheap stuff. All that and more in The Morning Shift for April 6, 2022.

Contents

1st Gear: It Must Be Fun To Be An Audi Executive Right Now

I will start this with a slightly long and boring aside. In 1965, Ford introduced a car called the LTD. This was a liar’s car, a sham clearly visible from the name — it was “limited” to what? How many Ford could build?

The car was a basic low-cost Ford sedan, but with all of the features and trims of a higher-priced luxury model. You got the quality of something more expensive, without having to pay extra for the brand recognition. It was a hit, and a huge win for the executives at Ford.

The problem was that Ford already sold a higher-priced luxury model based on the basic Ford sedan: this was what Mercury was for, and starting in 1965 with the LTD, it no longer had a reason to exist. As Curbside Classic pointed out, the LTD delivered Mercury its death sentence.

This is to say that a lower-priced brand within a larger multi-brand car company can always claw up some wins moving upmarket, but it never really makes sense for the upmarket brands already within the company portfolio.

All that being said, VW is doubling down on premium, as the Financial Times reports:

Volkswagen, the pioneer of the “people’s car” that epitomised the auto industry’s obsession with expansion, will axe dozens of combustion engine models by the end of the decade and sell fewer cars overall to concentrate on producing more profitable, premium vehicles.

“The key target is not growth,” said Arno Antlitz, chief financial officer, in a reversal of the stance taken by former VW executives.

“We are [more focused] on quality and on margins, rather than on volume and market share.” VW, he said, would reduce its line-up of petrol and diesel cars — which consists of at least 100 models across several brands — by 60 per cent in Europe over the next eight years.

VW’s new strategy is a sign of profound changes in the wider auto sector, which for decades has attempted to increase profits by selling more cars each year, even if doing so required heavy discounting.

The FT points out that VW is merely following what other car companies are doing as part of a broader industry trend. It’s just that other car companies making this pivot don’t literally have “people’s car” as their name. As lower-cost Chinese cars continue to make inroads into VW’s home market of Europe, I wouldn’t be surprised to see yet another VW pivot to affordability.

2nd Gear: Rivian Says It Has Delivered 1,227 Vehicles This Quarter

Rivian says that it has built 2,553 vehicles in the first quarter of this year and delivered 1,227 of them. If you add in last year’s figures that adds up to 3,568 Rivians in total, per Reuters.

Rivian says it wants to be making 25,000 vehicles per year, but it’s optimistic about it.

If you yourself have had a long and winding road waiting for your own Rivian to get delivered, please feel free to email us your story at tips at jalopnik dot com.

3rd Gear: U.S. Government Needs 100,000 EV Chargers And Only Has 1,100

A new government report took a look at two things: how many electric cars the government says it wants to have, and how many chargers it has for them. It turns out there’s a rather large gulf between the two, as Reuters reports:

The U.S. government may need more than 100,000 charging stations to support widespread electric vehicle use, a government watchdog told a congressional hearing on Tuesday.

The Government Accountability Office (GAO) said in testimony that as of March, federal agencies own about 1,100 charging stations. President Joe Biden in December signed an executive order directing the U.S. government to end purchases of gas-powered vehicles by 2035.

I’m sure it can’t be that hard to build, uh, 100,000 EV charging stations, right?

4th Gear: Tesla And BMW Plants In China Lockdowns Continue

It’s a bad time to be building cars in China, as Reuters reports shutdowns continuing at Tesla and BMW:

Tesla Inc.’s factory shutdown has stretched out to at least 12 days, much-needed semiconductors are piling up at manufacturers amid a shortage of truck drivers, and bankers are camping in their offices as Shanghai’s Covid-19 lockdown disrupts businesses in China’s financial hub.

Cases are at a record in the city, now the epicenter of China’s worst outbreak since the start of the pandemic, and the lockdown has been extended indefinitely. While the country is sticking to its rigid Covid-Zero containment playbook, President Xi Jinping’s request to limit the economic consequences is becoming harder to achieve in the face of the highly transmissible omicron variant.

[…]

Meanwhile, BWM has had its production in the northern Chinese city of Shenyang halted for two weeks after the industrial hub was locked down last month in an attempt to limit the spread of Covid-19.

The German automaker has suspended production at both of its factories in Liaoning province since March 24, after the municipal government imposed stricter controls over residents starting March 22, according to a Beijing-based spokesperson.

This is a reminder that when Tesla was faced with the prospect of Covid lockdowns in California back in 2020, Elon Musk said “nah” and hundreds of people got sick.

5th Gear: Hey Carmakers, You Recalled Those Fire-Prone LG Batteries Right?

Because NHTSA is asking about it, as Reuters reports:

The U.S. National Highway Traffic Safety Administration on Tuesday said it is opening a review to ensure all defective batteries produced by LG Energy Solution have been recalled by automakers.

The auto safety agency noted Mercedes-Benz, Chrysler-parent Stellantis, General Motors and Hyundai Motor Co. have issued recalls since 2020 due to internal failures in high-voltage vehicle batteries that pose fire risks.

NHTSA said the equipment query covers 138,324 vehicles and will communicate with LG “and other companies that might have purchased the same or similar equipment from LG, notify them of this defect in any vehicles they manufactured, and to ensure thorough safety recalls are conducted where appropriate.”

I am both pleased and amazed that NHTSA under Biden seems to be actually doing something. This was not always the case with NHTSA.

Reverse: The First Private Communications Satellite, Intelstat 1, Makes Orbit

From Encyclopaedia Brittanica:

On April 6, 1965, the first Intelsat satellite, Early Bird (also called Intelsat 1), was launched; it was designed and built by Rosen’s team at Hughes Aircraft Company. Early Bird was the first operational commercial satellite providing regular telecommunications and broadcasting services between North America and Europe. Early Bird was followed by Intelsat 2B and 2D, launched in 1967 and covering the Pacific Ocean region, and Intelsat 3 F-3, launched in 1969 and covering the Indian Ocean region. Intelsat’s satellites in geostationary orbit provided nearly global coverage, as Arthur C. Clarke had envisioned 24 years earlier. Nineteen days after Intelsat 3 F-3 was placed over the Indian Ocean, the landing of the first human on the Moon on July 20, 1969, was broadcast live through the global network of Intelsat satellites to over 600 million television viewers.