Honda and Volkswagen this week announced plans to ramp up their conversion to electric vehicles. Honda is moving production around to clear factory space for its forthcoming EVs, while Volkswagen says it is committed to investing more than $193 billion worldwide over the next several years. It is a turbulent time to be manufacturing automobiles. Inflation, interest rates, and the cost of energy are soaring while geopolitical tensions over the fate of Ukraine and Taiwan remain high, but these companies have to manufacture or die.
Honda Shuffles Its Production Lineup
Honda has been building the Accord at its factory in Marysville, Ohio, for more than 40 years. As part of plans to increase EV production announced on March 14, the Accord will now be assembled in Indiana, where it builds the Civic Hatchback and CR-V. Beginning next January, the Marysville factory will be converted to EV production, according to Reuters. Honda and LG Energy Solution are building a battery factory in Jeffersonville, Ohio. That facility is expected to become operational in 2024 and will have an annual capacity of 40 GWh of battery cells.
The two assembly lines at Marysville will be combined into one, making it possible to begin the work of converting the other to build electric cars. The factory is expected to manufacture only EVs by 2026. Honda will begin shuffling operations at its Anna Engine Plant in Alabama and its transmission factory in Georgia to begin manufacturing the components needed to manufacture electric vehicles. Honda’s transmission plant in Georgia will dedicate one production line to e-axle production and its Anna, Ohio, engine plant will shift production of some engine components to a Honda engine plant in Alabama to prepare for production of battery cases for EV models, the company said.
In its press release, Honda said, “As part of its goal to achieve carbon neutrality for all products and corporate activities by 2050, Honda has a vision to make battery-electric and fuel cell electric vehicles represent 100% of its vehicle sales by 2040. Even as Honda accelerates preparation for EV production, the company plans to sustain current ICE and hybrid-electric vehicle production in order to continue to meet anticipated strong customer demand through 2030 and beyond. The sustained success of ICE and hybrid-electric vehicle sales also will support the required investment in the electrified future.”
Volkswagen Pledges $193 Billion To EV Transition
Volkswagen said on Tuesday that it would spend $193 billion on software, battery factories, and other investments as it aims to make every fifth vehicle it sells electric by 2025. According to the New York Times, the company will also focus on expanding its presence in North America and becoming more competitive in China, which Oliver Blume, CEO of Volkswagen Group, described as one of Volkswagen’s most important markets. Blume told the press that two thirds of its future investments will focus on producing battery cells, developing software, and shoring up supply chains of critical raw materials.
Last September, Blume laid out a 10 point plan for how Volkswagen expects to pivot to building mostly electric vehicles. [Porsche is focusing on the development of synthetic fuels for customers who demand a combustion engine.] Speaking to the press this week, he reiterated those 10 points and said, “For me, it is important that we have a clear orientation of where we are going.” 2023 will be “a decisive year” for the company, he added. A portion of the $43 billion raised last year by the Porsche IPO may be used to help pay for implementing that plan.
“We must transform ourselves into a technology and mobility services group,” Arno Antlitz, Volkswagen’s chief financial and operating officer, said at the Tuesday media event. “We need to focus on our platforms, such as our hardware for battery-powered electric vehicles, a unified software stack, batteries, mobility, autonomous driving.”
Going forward, Volkswagen plans to customize its electric vehicles to the expectations of customers in different markets. In China, for instance, the emphasis may be on in-car entertainment options for drivers and passengers. Chinese customers apparently enjoy having the ability to do karaoke while driving. In the US, the emphasis will be on rugged off-road electric vehicles, because everyone in America expects to be able to traipse through Denali National Park on the way to work. The rejuvenated Scout brand will cater to those whimsies. Volkswagen announced last week it will construct a battery factory in Canada to supply batteries for the electric cars it manufactures in the US.
The Return Of The People’s Car?
Updates from Volkswagen on the bottom of the article.
Perhaps the most important part of the Volkswagen press event this week was tucked in near the end of its announcement. “The brand anticipates an all-electric share of around 80 percent in Europe by 2030. To this end, ten new electric models are to be launched by as early as 2026, including an all-electric Volkswagen for under EUR 25,000, which makes its world debut today as the ID. 2all study.” More on the car was announced here.
The name “Volkswagen,” for those who don’t speak German, literally means “people’s car.” The original Beetle was designed to be small, light, economical, and easy to repair at a time when roads were poor, economies were in tatters because of World War II, and people could not afford anything more than basic transportation. Other cars of a similar type included the Citroen 2CV and the original Fiat 500 — a car that gave new context to the word minuscule. Today, the average price of a new electric car before incentives is $50,000 or more.
There is a need for affordable EVs, but there are few to be had outside of China, where tiny electric cars with modest range are popular. Tesla has studiously avoided that segment of the market, so the field is wide open for Volkswagen, at least in the European market where cars are often limited to intra-urban use.
Volkswagen says it expects the ID.2all to go into production in 2026. It will be built alongside similar models from SEAT and Skoda at the company’s factory in Spain. That name may change. There are rumors that the company is thinking of using the Golf nameplate for the smaller car, which is expected to be about half a meter shorter in length than the ID.3 and use the latest MEB+ EV chassis developed by the company.
Volkswagen Brand CEO Thomas Schäfer told Autocar last October, “The Golf name has huge value. The recognition it receives at [customer] clinics — people absolutely understand what we are talking about. So to change the name to something completely different doesn’t make sense.” Unnamed sources have also told Autocar “the true value of the Volkswagen Golf lies in a car the size of the ID.2.”
For now, the company is calling the car the ID.2all. What it will be called when it goes into production is anyone’s guess. In a press release, the company stresses that what we are seeing is a concept only and that the actual production car won’t be unveiled until 2 years from now.
There was some controversy about the new car, which originally was called the ID.Life. After Blume took over from Herbert Diess, that concept was axed and the car unveiled today came into existence. It is meant to be for today’s generation what the original Beetle was — an affordable car for the people. Clearly, the company expects the ID.2all to follow the path established by its predecessors. That’s a good thing for people who have been waiting for an entry level electric car, one that carries on the Volkswagen tradition of value and reliability with a dash of style. Hopefully, it will also spur others — we’re looking at you, Elon — to build affordable electric cars for the masses.
Note: We’ve reached out to Volkswagen for additional info and will update this article if we receive a response.
Updates from Volkswagen in response to questions from us:
Hello! Great questions. There's no plan to release an ID.2 model in the US at this time, but all future concepts/updates are posted on our https://t.co/TUZ713DXRo site. You're correct that the cell technology in the lithium ion battery used for the ID.4 is prismatic. (1/2) -KO
— Volkswagen (@VW) March 20, 2023
However, we cannot speak to design decisions made by other manufacturers. All 2023 ID.4 vehicles are assembled with battery components from either LG Energy Solution or Sk On, with the latter producing them in the US. (2/2) -KO
— Volkswagen (@VW) March 20, 2023
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