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Some Volkswagen strategists see battery-electric, diesel cost lines crossing by 2023-2025; TRANSFORM 2025+

22 November 2016

The increasing stringency of global emissions standards, both current and projected, is driving up the cost for internal combustion engines to meet those standards, although numerous technology pathways exist. (Earlier post.)

In a conversation with Green Car Congress at AutoMobility LA last week, Dr. Matthias Erb, Executive Vice President of the NA Engineering and Planning Center, Volkswagen Group of America, said that, as a result of those pressures, some strategists in the Volkswagen Group project that the cost lines between battery-electric vehicles and diesel will cross within the coming decade.

What we see in terms of emissions standards is that they are getting tougher and tougher, and it is getting more and more expensive to meet those standards. As a result, we see a cost line crossing between battery-electric vehicles and diesels. Some of the strategists in our company see that by 2023, 2025, due to the emissions standards for diesel, [diesels] are going to become really expensive. We expect that when those two lines cross, this will be the time when huge pressure comes on diesel.

—Dr. Matthias Erb

Reflecting that awareness, the executive management of the Volkswagen brand has just rolled out its TRANSFORM 2025+ strategic program which will set the course for the brand over the next decade and beyond.

In addition to focusing on clearer brand positioning across the various regions and segments, the strategy calls for the brand to make massive investments in e-mobility and connectivity.

The Chairman of the Volkswagen brand Board of Management, Dr. Herbert Diess, laid out a three-phase re-orientation for the brand.

  • In phase 1, up to 2020, the brand will be entirely restructuring its core business and completing a transformation along the entire value stream. At the same time, the company will develop new competences.

  • In Phase 2, up to 2025, Volkswagen intends to take the lead in e-mobility on the basis of its regained strength as a leading, profitable volume manufacturer. The strategy in this phase aims to create a broader earnings base, for example through new mobility services.

  • Volkswagen also intends to play a key role in shaping the major transformation in the industry expected after 2025. The objective is to achieve a leading role in the new world of mobility by 2030.

A key element of the new strategy is positioning at the top end of the volume segment, near to the premium competitors. To date, Volkswagen has only achieved its objective of becoming “top of volume” in China and Europe. In the future, Volkswagen aims to achieve this position throughout the world through a realignment of product strategy, beginning with an SUV offensive in the first stage (e.g., the new Atlas earlier post) and the electrification wave in the second stage (e.g., the new MEB-based vehicles such as the ID, earlier post).

E-mobility offensive. Volkswagen’s e-mobility offensive—which is to result in selling one million electric cars per year by 2025—is to be financed by a number of measures including the discontinuation of certain low-volume, low-earnings conventional models and model variants. This will release funds in excess of €2.5 billion (US$2.65 billion) for e-mobility.

From 2020, we will be launching our major e-mobility offensive. As a volume manufacturer, we intend to play a key role in the breakthrough of the electric car. We are not aiming for niche products but for the heart of the automobile market.

—Dr. Herbert Diess

For the North American region, this means that local production of MEB vehicles will begin in 2021. In North America, Volkswagen intends to evolve from a niche supplier into a relevant and profitable volume producer.

In China, Volkswagen intends to strengthen the “top of volume” position it has already reached. This will be achieved by an SUV offensive and by rapidly launching electric vehicles. In China, Volkswagen also aims to benefit from the potential in the strongly growing economy segment. Work has already started on the development of appropriate models. In other major markets such as India, South America and Russia, Volkswagen also intends to develop the economy segment.

Connectivity. The Volkswagen brand will develop its own digital platform. By adopting this approach, Volkswagen will be moving closer to its customers on the one hand and developing new earnings potential with a comprehensive range of services on the other hand. By 2025, Volkswagen expects to have about 80 million active users throughout the world. This would mean that the brand would have the leading digital ecosystem in the entire automotive industry. Volkswagen estimates that its sales revenue from services related to networked vehicles will reach about €1 billion per year by 2025 and expects a significant contribution to earnings from this business area.

48V and other technologies. As is the case for every high volume manufacturer, even meeting the aggressive electric vehicle sales targets of 1 million units per year by 2025 still leaves Volkswagen another 9 million or so non-electric vehicles that will need to be more efficient, but also cost effective.

Technologies such as the new Millerized engine in the updated Volkswagen Golf (earlier post) will certainly play a key role, Dr. Erb said. Another favorable option is the emergence of the 48V mild hybrid systems.

The 48V system is a valuable alternative especially for cars where it doesn’t make sense to invest a lot of money into hybridization. The 48V discussion is always interesting. You are adding costs, but you are also adding driving performance.

—Dr. Matthias Erb

(In a 2015 report on the prospects for 48V automotive systems, consultancy Frost & Sullivan forecast that the Volkswagen Group will lead in this area primarily because of Audi’s 48V offering. The consultancy projects that by 2025, Volkswagen Group will have 48V volumes in excess of 1 million systems in North America and Europe combined, far exceeding its competition. Earlier post.)

November 22, 2016 in 48V, Batteries, Diesel, Electric (Battery), Vehicle Manufacturers | Permalink | Comments (23)


More public/investor gibberish from VW. VW bond ratings are already hurting. Can't let that capital dry up. By 2025, the truth about the cleanliness of various forms of stored energy (electrons, chemical, etc.) will no longer be "Obscured" and shall be readily available to the Commoner forth right. Current modern diesel emissions are as clean if not cleaner than current gassers. It will only get better.

In the future, we will Price energy based on its overall cleanliness. As such, the Commoner will use his dumb logic to choose the vehicular platform that best suits his Cost/Benefit needs. HEV will be the predominant platform (with onboard gas/diesel, NG, hydrogen, whatever). Half the HEVs will have plugin capabilities (most of the time the Commoner doesn't need it, just like their 20" rims). BEVs will have 20% of the market by 2040.

Let's hope that by 2040, 90% are BEVs and fossil chemicals are only used to create products other than fuels.

LAD. In my future the Energy is priced according to its cleanliness Factor (TBD). The Factors will be locally dependent, so the mix of platforms will vary.

I only see 90% BEV if the Electric Load (U.S) is better than 70% Nuclear/Hydro mix with Wind/Solar(grid storage).

You did read that the executive of Planning Center said "some strategies cross over to BEV preference". So, it's just one of many possible strategies as the diesel emissions and stringent regulations may cross paths. This is just pie in the sky possibilities.

The rationale per regulations is the BEV operates pollution free. We know it doesn't. It's analogous to a extended grid power, be it a clothes dryer or auto. Sure, if the gird was pollution free and affordable a good deal even if horrible through put of energy to end user. However, rating an electric motorefficiency and comparing that to ICE is a false dichotomy. Even comparing the efficiency of power plant to the engine efficiency is false. It has to be well to wheels. The cost of distribution, investment, inconvenience, cost of infrastructure change, disposal costs, and the entire pollution stream. This all tabulated for the miles per gallon. Not some theoretical MPG based upon electric motor efficiency for pollution. The EPA has a very poor benchmark to measure their legal directive.

Considering the extremely low cost infrastructure change required for ethanol. The effortless transition and convenience with a very short distribution supply chain shouldn't that scenario prove to be a fierce competitor? You know if given a realistic objective regulation environment. This fuel alone has the flight path to become carbon negative. So, how could the grid compete even in its most optimistic configuration? Diesel? We should be optimizing high blend ethanol engines and the production process and sell that technology to the world.

If your goal is to clean up the atmosphere, the only way to do that is not to add chemicals to it. No diesel, alcohol, coal, natural gas, etc. Using the Sun and the wind to produce energy is the least expensive and the less polluting way.

The cost of driving one mile in a BEV depends on how much you drive it during its operating life. If you only drive it 150.000 miles it will be more expensive than a similar gasser/diesel. However, if you drive the BEV over 500.000 miles something that is easy for a self driving taxi BEV then BEVs are already less costly to drive per mile than gassers/diesels.

With a fully self-driving Model 3 you can drive it for as little as 20 cents per mile if you drive it 100,000 miles per year for 10 years. You can get below 35 cents per mile all costs included with a diesel or gasser.

The other thing that will make BEVs cheaper to drive per mile is the decrease in battery costs. However, this cost will take time to matter because batteries only improve their energy density by about 5% per year. In high volume production battery costs drop by the rate of improvement in energy density because high wh/kg batteries require less raw materials for their manufacturing and raw materials is like 70% of all cost when making batteries in high volume.

The BEV cost advantage will start when Tesla turns its Tesla Network online sometime in 2018 and offer taxi services to everybody at a much better price than human operated taxi services. And Tesla can keep lowering their prices all the way down to 20 cents per mile and still make money.

For VW to compete with Tesla they need to launch a VW Network with fully autonomous BEVs. They may be able to do that by 2020 if they really work hard on it. However I am pessimistic and think the old automakers may need until after 2022 before they are able to launch a Tesla Network competitor.

In the above I ment to writhe "You can’t get below 35 cents per mile all costs included with a diesel or gasser."

I used to think the BEV held the autonomous car market, but now more skeptical. The refueling cost advantage for BEV will evaporate as cost of power is projected to increase per road tax load, green power needed investment cost, required infrastructure and regulations compliance cost. The energy efficiency of the BEV is not that impressive when stacking up the well to wheels losses. Refueling time would advantage the liquid fuel and gas vehicles.

Solar is not projected to accomplish much and wind requires a heavy investment with a boat load of expensive infrastructure and higher polluting back up generation. Meanwhile biomass has been estimated to be more than enough to meet entire energy needs of planet going forward to 2050. So, my thinking is their is no silver bullet solution. It's wise to optimize or exploit the strengths of each energy source. Meaning not to over sell solar and wind as the end all meets all of humanity. At best it will be an ever increasing small percentage.

Biomass has the advantage to be moved from a GHG pollutant. Meaning nature's decomposition of biomass will pollute more than man's careful deconstruction of the fuel to gain power. Adding this advantage to increasing the percentage of wind, solar, and biomass renewable energy/power within the farming and processing of ethanol and given the huge improvements of efficiency gain possible within the processing of ethanol itself, well, the fuel should gain to the rating of carbon negative. This will happen at the same time the ICE/hybrid technology will maximize the fuels use. Same for gassified biomass power plant efficiency gains.

People falsely think that wind or solar is pollution free. It is not and the fuel is not free. First the cost of infrastructure is huge to make it possible. Manufacturing emissions are high. There is a replacement cost as well. Backup power often suffers high emissions. Also, emissions are not all bad. Meaning nature is the biggest emitter of emission upon earth. Nature is the behemoth and were a tiny mouse. We should think in terms of benign emissions or earth friendly. Man's influence upon nature can be positive. A force of good. We watch and read to many negative stories.

@ trees
I can't quite follow your philosophy of reasoning. Accepted, that we cannot prevent earthquakes, tsunamis, volcanic eruptions, hurricanes, tornadoes, comets, meteors and asteroids with the subsequent devastation and pollution caused by such occurrences. But that by no means implies that we should take all possible measures to equal those natural events because they are by no means even close to the results of those natural catastrophes. No, it should be our utmost effort to avoid anything to add to those natural events that cannot be avoided. It is no consolation whatsoever to think that the black pest during medieval times, caused by carelessness and negligence of hygienic measures, was by no means as severe and fatal as the asteroid that wiped out 98% of all forms of life 65 million years ago.

T is just another lobbyist spreading lies on the internet on behalf of people with evil intentions. Alternatively he is just another imbecile nobody.

I think your philosophy is first do no more harm as we can't control earth's natural science? Well, good enough, but we have a lot of tools to utilize and we need to maximize or exploit the lowest cost best value. It will take much engineering to wring out the most adapt energy application. It is such a large task to push forward with the best mix of technology. Auto technology is a study on this and very interesting to see how they progress. We are sold on a continuous diet of Green Energy virtues, but this is very shallow analysis that has yet to be proven within usefulness, nor proven it's environmental value. No one thinks the technology can go it alone and if attempting such a feat will have bad consequences. Mostly economic.

It is good to support new and promising technology, but let us not throw the baby out with the bath water. Like I said we have many tools available. Think of the next technological breakthrough. This will move the target and we may be rated foolish attempting to put all eggs in the wind or solar basket with outdated equipment? The Energy Department serves are needs well. They push the technology for every tool be it nuclear, wave, solar, biofuel, ICE, battery, turbine, coal and do so upon minimizing pollution. Think in those terms.

Trees. I like your reasoning. People forget too that Copper isn't cheap. The ingredients that go into high powered magnets and electronics isn't cheap. We cannot expect to cover the earth with Solar collectors and Wind turbines -- we should do as much as we can here though. I am optimistic about the Solar/Wind power future. I also think Nuclear has a Big future.

Frankly, we all need to drive less. We need to Mandate improvements in the common household Dryer. It is outdated Electric Resistive technology. We need 7+ Cubic Ft. HeatPump Dryers that are cost effective and really work. A lot of these engineers at the Auto Companies building useless Apps should be called into service to fix the Household dryer dilemma.

Utter nonsense. The cost lines have already crossed. EV drive trains are fully price competitive with diesel and gasoline drive trains at the high end of the light vehicle market. Continually falling battery prices both increase the addressable EV market while also increasing EV margins at the high end. ICE drive trains will increasingly be unable to compete in the high margin premium segments and will increasingly only be used in lower margin applications. Trucks and SUVs are not immune to this ongoing effect.

Copper is not the only conductor. And, it is plenty cheap enough and available in large enough quantities for massive electrification of the transportation system. Alternative like doped graphene seem likely displace copper as a conductor long before resource limits pose issues anyhow.

On the flip side, resource limits are extremely likely to keep petroleum prices well above electricity prices for transportation. The only reason resource limits would not cause that pricing effect is if BEVs rapidly displace petroleum from the transportation fuels market.

Political actors can only delay the ongoing move away from fossil fuels. Any country where fossil fuel interests are able to delay the switch will suffer permanent ongoing losses into the future from their lower economic participation in the displacing technologies. Propping up fossil fuels is economic treason.

That would be nice if so. I read no credible analysis that confirms what you speak of. You know the people with money on the line. Analysis have the BEV sales minuscule for the foreseeable future. Hybrids enjoy more popularity. Plugins very low sales volumes. Mild hybrid have tremendous sales growth, but even at that only something like 30% of the market. The plain ICE vehicle maintains status quo as far as to be determined.

You do realize the battery car must suffer small car status to be efficient. That in itself minimizes the market share. The best bet is if cities regulate the vehicle to popularity. I don't think that will happen as the conventional car has exceptional low emissions. So, not a big benefit to regulate and anger the voting public.

Also, battery technology will make marginal improvements, not the magical 2x or 10x improvement in cost, weight reduction, and power density required. I do like electric drives, but the best bet to power them would be fuel cell or small ICE power plants.

Stan. The lines have crossed only for miniscule segments of the population. It is not practical to the Commoner.

I side with Trees as I believe that the HEV in it's various configurations is the Future. Extended battery-only capabilities is a nice feature, but you will see over time that the efficiency gains of the generic HEV with onboard ICE technology will be so effective that the extra components required for the PHEV will not be necessary from a cost/benefit POV to the Commoner.

"You know the people with money on the line. Analysis have the BEV sales minuscule for the foreseeable future."

Yeah, there is plenty of FUD being spread. Lot's of money for BS analysis and other types of misinformation. All success achieved at slowing the transition only does so at the expense of future profits in the winning technologies. Economic treason.

The products exist and are clearly cost competitive but somehow it is a debate. Hard to make a man believe something when his paycheck depends on him not understanding it.

"The lines have crossed only for miniscule segments of the population. It is not practical to the Commoner."

Nearing 50 percent of the total market and the cost declines enabling it just make the margins fatter and fatter on that "minuscule" premium portion with most of the industry's profits. It is a done deal:

Funny how they tried to dismiss it just a few years ago:

Some are referring to hard market analysis data and others to editorials, internal promotions, or future projections. The former is hard data that companies spend money on production models the latter is market speculation that, of course, is serious stuff, but like the prototype model may not make it to production. It's a moving target. We are on a slippery slope of change that could go many ways or slow down to basic bread and butter products. For example the classic Uber app really takes most of the AV benefit away. Purchase price may reign most important factor or maybe safety? Pollution concerns should dwindle as technology is handling that well at all fronts. We may see the car market become more or less a staple. Meaning no distinction and only a service. Competition would then race to lowest cost service. This would reinvent manufacturing to the few lowest cost producers in the world. The service winner would depend on availability, cost, cleanliness, and utility worthiness of vehicle. People would care less if it's powered by battery, ICE, fuel cell, or any combination. They prefer it to be quiet and environmentally temperature controlled and filtered air. Maybe a water tap and waste dispenser. WiFi enabled with work desk or entertainment system.

Trees. Good analysis. You are a poet.

An internal combustion engine is a simple device to transfer internal energy U of the gases contained inside the cylinder to the piston. However, not all the work so transferred is available at the drive shaft for actual use. For achieving clean burn fuel efficient internal combustion engine, a new operating cycle is created as shown in Figure 1 below plotted in a U-V diagram instead of a p-V diagram. With the U-V diagram as a road map, the goal of clean burn fuel efficient internal combustion engine can be easily achieved. A state is denoted by two state variables U and V instead of by a constant. At state (U1, V1), the beginning of an adiabatic compression stroke, V1 = 15.6 ft3, T1 = 311o K (assumed for this discussion). The internal energy U1 at state (U1, V1) is equal to cvT1 = 95.73 Btu. The new engine operating cycle transforms fuel chemical energy Q into mechanical work done W first by a piston-cylinder assembly to transform heat addition Q into indicated mechanical energy of the reciprocating piston. The expansion stroke of the new engine cycle begins from state (U3, V3) and ends at state (U4, V4) transforming (U3 – U4) into equal amount of indicated power output. Based on internal energy balance, the indicated power output is equal to (U3 – U4)/U3 or (T3 -T4)/T3.

Figure 1

The Difference Between U-V Diagram of Figure 1 And the p-V Diagram

The U-V diagram is an accurate model of a reciprocating internal combustion engine cycle. It shows how the work done W and heat addition Q change the internal energy of the working fluid. The compression process from state (U1, V1) to state (U2, V2), increases U1 to U2 with U2 = U1(V1/V2)k-1. With the air as working fluid, k is equal to 1.4. A combustion process from state (U2, V2) to state (U3, V3) increases U2 to U3 with U3 = U2 + (W + Q) where W and Q are compression work done and heat addition taken place simultaneously before the moving piston reached the end of compression stroke such that all products of combustion are compressed into V3 before the expansion stroke begins. The combustion process converts the hydrocarbons into HO2 and CO2 quickly at the speed of molecules. An adiabatic expansion stroke from state (U3, V3) to state (U4, V4) reduce U3 to U4 with (U3 – U4) transformed to an equal amount of mechanical work engine output.

In Figure 1, V2 and V3 are equal to V1/16 and V1/18 respectively for this discussion. At state (U2, V2), U2 = U1(V1/V2)0.4 = 290.2 Btu. The upper limit of U3 Is 650.0 Btu such that the combustion temperature 2112o K (650/0.3078) is below the critical temperature of NOx formation. The Q addition is equal to 359.8 (650-290.2) Btu. For all internal combustion engines, the brake power conversion efficiency is equal to the indicated power efficiency minus the friction loss of the cylinder-crankshaft assembly. The indicated power efficiency is equal to 68.5. The friction loss of the cylinder-crankshaft assembly is about 20 percent of indicated power to have a net brake power efficiency of 61.7 percent. A small internal energy is transformed into compression work to compress the products of combustion into V3. In the case of gasoline and diesel cycles, combustion process take place at the beginning of expansion stroke where W and Q have different signs and the fuel has no time to burn completely and there are unburned hydrocarbons in the working fluid within the cylinder. There is no technology available to eliminate such efficient internal combustion engine, these unburned hydrocarbons are prevented to form by having a combustion process taken place before the moving piston reaching the end of compression stroke. For automotive application, the rotating shaft of the new engine is connected to a drive shaft of the vehicle to provide whatever brake power to operate the vehicle. An electricity generator can be connected to the engine shaft to provide electricity to every household, or every community at unbelievably low price.


The equation of state U2/U1 = (V1,V2)k-1 has been derived from the law of conservation of energy. This equation of state is then used to compute the change of U due to change of V and vice versa. For achieving high fuel efficiency without engine out emissions, a combustion process begins at state (U2, V2) and ends at state (U3, V3). This clean burn fuel efficient internal combustion engine can be used to drive an electricity generator. Furthermore, this new engine can greatly reduce construction and operation costs. It can also generate electricity locally to avoid power loss though electrical grid. Existing reciprocating engines can be retrofitted to operate as the clean burn fuel efficient internal combustion engine. The urgent problem of air pollution and fuel shortage can be solved within a short time.
Specific fuel consumption

Trees> You do realize the battery car must suffer small car status to be efficient.

This is not only false, it is nonsense, as is your assertion that nature is the largest emitter.

With the exception of unusual events like major volcanic eruptions, CO2 levels have been relatively stable for millennia. Until the industrial revolution and burning of coal and other fossil fuels began to tip the balance.

Electricity generation, fossil fuel transportation and livestock are disturbing the equilibrium.

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