How VW Is Turning Engine Factories Into EV Battery Plants | WSJ

Overview of VW's Transformation

• VW has manufactured engines for popular cars for over five decades.

• The company is now facing challenges as diesel engines emit 10 to 40 times more pollutants than expected.

• Acknowledgement of customer dissatisfaction due to emissions issues.

Shift in Industry Trends

• Global sales of internal combustion engines are expected to drop by over 50% by 2035.

• Electric vehicles (EVs) are emerging as a crucial market.

• VW is converting its engine factory into an EV battery facility, part of a plan to build six such sites across Europe, costing around $15 billion.

Transitioning Manufacturing

• The transition involves moving from combustion engines with over 2,000 moving parts to electric motors with roughly 20 parts.

• VW is restructuring its workforce to adapt to these new manufacturing techniques.

• The competition includes Tesla and numerous startups that have fewer legacy constraints.

Challenges for Traditional Automakers

• Legacy automakers like VW have significant investments and therefore higher stakes in the transition to EVs.

• Startups can begin fresh without a legacy footprint, thereby speeding up the process.

• VW's Salzgitter plant aims to establish itself as a competitive player in the EV market by 2035.

Current State of EV Production

• Tesla operates multiple gigafactories, including a new facility in Berlin.

• Other startups such as Lucid and Rivian are launching EV production this year with new factories.

• Traditional manufacturers (GM, Ford, VW) are investing billions to maintain market relevance, with VW committing $43 billion in five years.

Investment in Salzgitter

• Frank Blome, a VW engineer, leads efforts in building a small-scale prototype and mass production plant.

• The factory will feature labs and pilot lines to refine battery technology.

• Plans for a new facility capable of producing batteries for over 600,000 vehicles annually at an estimated cost of $2.5 billion.

• VW is collaborating with battery supplier Northvolt, a major investor in battery technologies.

Battery Technology Development

• VW's labs are focused on battery types needed for future EVs, with efforts on recycling and next-generation solid-state batteries.

• Solid-state batteries are projected to enable faster charging and greater mileage compared to current options.

• Transitioning to EVs necessitates fewer mechanical engineers and a demand for new skills in fields like electrochemistry and software development.

Workforce Considerations

• VW will retrain portions of its workforce, but some legacy job losses are anticipated.

• Job cuts have already occurred with 7,000 roles eliminated over five years and 23,000 positions cut since 2016 through attrition.

• A future workforce of around 1,500 to 1,600 employees is planned for the new battery production.

Environmental Challenges and Reputation

• The company faces high stakes to change its image post-emissions scandal of 2015.

• VW pleaded guilty to emissions cheating and is now working to restore credibility while complying with new environmental regulations.

• Current US sales are significantly lower compared to 2012, indicating the need for a clean and innovative transformation to regain trust.

Conclusion

• VW's ability to reinvent and strategically pivot towards electric vehicles is essential for survival in a rapidly evolving automotive landscape.

• Competing against both traditional rivals and new entrants requires swift and effective changes in production and technology.