Background. Winterkorn noted that the industry is experiencing its worst crisis in decades, with a collapse in the global market of 18% in the first half of this year. Although Volkswagen sales were down 5.1% for the first half, in June unit sales rose 6%. Volkswagen is Europe’s largest automaker, and saw its global new vehicle market share increase to 11% during the first quarter of 2009.

This performance, Winterkorn said, “is no reason for euphoria” but shows that the Volkswagen group—which comprises nine automotive brands—is staying on course, and shows that its strategy to 2018 is on the right track.

We have nine strong brands that work well together. We have rock-solid finances. We have a huge technological potential, despite the crisis. And above all, we have attractive and environmentally friendly vehicles. From this solid foundation, we proceed to the second mammoth task these days: the development of alterative, emissions-free drives.

With electromobility, the automobile industry faces a fundamental technological upheaval...Our path leads away from oil, to emission-free mobility, and the electric car plays a key role...CO₂-neutral fuels play another key role.

—Martin Winterkorn

Electromobility is a response to four major megatrends, Winterkorn said:

• The enormous growth of population and traffic.
• The imminent collapse of traffic in megacities such as Mumbai, Mexico City or Bangkok. By 2050, 70 to 80% of people will live in cities.
• The necessary reduction of criteria and greenhouse gas emissions, both globally and locally. Currently, cars contribute about 7% of global CO₂ emissions.
• Limited fossil fuel resources. The perspective of rising oil prices is a turboboost for a change in customer behavior, he said.

While in the past consumers tended to count horsepower and cylinders in the engine, they now are focusing more on fuel consumption and CO₂ values, he said. “This trend is no fad, but a fundamental paradigm shift.”

Volkswagen had begun exploring hybrid and electric drive technology in the 1990s. VW, Daimler subsidiary Daug and Varta developed a NimH battery in the early 90s, and the VW group put the Audi duo hybrid on the road in 1997. However, Winterkorn said, VW, and the German auto industry in general, abandoned the early advantage and work in electromobility.

Volkswagen is now committed to electromobility, he said, but noted that “electro” is not enough. “A company such as Volkswagen must include all relevant technologies.”

VW and the electric car. Noting that “there are at least as many predictions as experts” about the size of the potential market for electric vehicles, Winterkorn said that Volkswagen is estimating a global market share of 1 to 1.5% in pure electric vehicles in 2020. That penetration could be significantly higher in big cities and certain regions, such as China.

We are witnessing an electro-hype. Experts, consultants and politicians tumble over one another with forecasts. And the auto industry doesn’t hold back on announcements. The result is massively false expectations by the customer...More than eight percent of drivers in Germany are rock solid convinced that the electric car is already here.

I think this development is dangerous, because we lose not only potential customers, but we are also at risk of disappointing the.,. The everyday, affordable and safe electric car for everyone is feasible. But it is also true that the way forward is long and tedious. As I said before, this is not a sprint but a marathon.

—Martin Winterkorn

Electric cars face three major challenges he said. First is the energy capacity and the recharge time of current batteries, which now are “simply inappropriate” for pure electric propulsion. While lithium technology has the potential to meet most of the needs, he said, much research and development work is still required.

(Volkswagen is partnering with a number of companies, including Sanyo and Toshiba, on batteries, power electronics and electric machines. In May, VW and Chinese carmaker BYD signed a memorandum of understanding to explore the options for partnership in the area of hybrids and electric vehicles powered by lithium batteries. Earlier post.)

Second, the electric car has to move from the “eco-niche” consumers to the mass market. Customers want adequate range (the example he gave was from Munich to Hamburg—about 775 km (480 miles), a one-to-two hour recharging time along with a quick charge option; and a price increase of a maximum €2,000 (US$2,800) more than today. The current price of a battery pack for just a short-range electric vehicle is between €8,000 to €12,000 he noted.

Third is a corresponding infrastructure including nationwide recharging stations, intelligent network, and uniform standards.

Above all, it is the origin of the electricity. Every electric car is ultimately only as climate-friendly as the generation of electricity it uses. Does it ever make sense ecologically to operate a car with power from a coal-fired plant? What is the potential of renewable energy sources? Should we not perhaps even reconsider nuclear energy?...These questions are important for electric cars playing a large role in the future.

—Martin Winterkorn

Volkswagen fuel and propulsion strategy. Saying that “electric alone is not enough” Winterkorn said that for the next 15-20 years in Europe, diesel and gasoline engines will dominate. Other markets will have a different emphasis he suggested; flex-fuel engines in Brazil, for example, and CNG and LPG is countries with high gas resources, such as Russia.

For the medium term, Volkswagen sees a mix of drive concepts:

• Highly efficient combustion;
• Natural gas vehicles;
• Second-generation biofuels (e.g., BTL and cellulosic ethanol);
• hybrid and electric traction; and
• possibly the fuel cell.

Winterkorn said that VW was continuing to focus on improving the efficiency of the combustion engine, while at the same time driving the electrification of the powertrain in a step-by-step approach, first with increasing hybridization, then the addition of plug-in capability as in the Golf TwinDrive (earlier post), then full electrification.