Automotive > Powertrain, Body, Chassis & Safety Blog

Herbert Diess – The Man Behind VW’s Transformation To Electric

by Kevin Mak | Dec 15, 2021

On Friday, 10th December, the supervisory board at Volkswagen Group extended the CEO contract of Herbert Diess, the man behind the transformation of the auto group to electric.  The announcement comes after strong reticence among the workforce and trade unions over comments made by the CEO regarding the future of the main Wolfsburg plant in Germany.  The supervisory board, though, has taken away his responsibility for corporate operations, such as China and group sales, and make him focus more on group strategy. 

VW CV Photo of Diess

(Source: Volkswagen)

As Tesla overcomes its “production hell” and is raising Gigafactories in Shanghai, Berlin and Austin, Texas, it is also exposing the inefficiencies behind the traditional OEMs.
• Even with a dedicated electric vehicle architecture like MEB, it takes 27 hours to assemble a VW over 10 hours for a Tesla.
• The reason behind this is the increased levels of automation used to assemble a Tesla EV over a traditional OEM that is inexperienced in making EVs.  For instance, there are hundreds of components used in making combustion engines, while robots assemble the stator coils in an electric motor or in rolling-out battery cells in an EV.
• The transition from ICE to EV would mean that many workers in engine plants would become surplus to future requirements.  The fear, behind VW’s Project Trinity, is that 30,000 staff would have to be laid off after the construction of an EV-centric production line at Wolfsburg, before the rest of the site is retooled for EVs by 2026.
• Not only VW, but a trade union in Italy claims that 60,000 jobs are at risk in the transition to EVs and that protests were made at supplier Bosch.  The European suppliers’ association, CLEPA, claims that 500,000 jobs are at risk across the region from electrification.

With trade union reps holding half of the supervisory board’s 20 seats, there was a serious risk that Diess would lose his job and that the transformation to electric would be stopped in an effort to save jobs.  However, I am glad Diess will continue his work in transforming the company:
• Volkswagen will not be showing full contrition in the 2015 Dieselgate scandal, had it let go of Diess.
• The arrival of MEB is only the beginning for VW as the majority of its business is still in ICE.  In 2022, 70 percent of light vehicle production at VW will be pure-ICE and 90 percent will be ICE including hybrids.  With the urgency of COP 26, mandates (and consumer demand) will require a further push towards battery electric with the proportion of VW’s total production levels increasing from 10 to 29 percent by the time Project Trinity starts.
• The move to electric has to be profitable as government purchasing incentives are phased-out and that battery costs fall from economies of scale.  Further efficiencies are needed to make EVs affordable and make cost parity with ICE.
• While ICE is becoming defunct technology, nevertheless the staff can be re-skilled in electric, as it has been in the plans of rival OEMs (such as Renault and Stellantis) and suppliers (such as PSA-Nidec in electric motors).  There are also a range of new systems being required in electrification, such as battery management and charging systems that require development and production.
• In the case of Tesla’s rival EV start-ups, particularly in China, spare production capacity at ICE-making OEMs can be utilised in producing EVs through strategic partnerships.  Not only does this enable new EV models go into production (without the heavy fixed costs associated in constructing new production facilities), but it also helps failed OEMs to raise utilisation in their facilities and gain much-needed technologies for their EVs.  An example of this in China includes NIO EVs being made by JAC.  But furthermore, it prevents automotive workers from losing their jobs.   

While new technologies and resulting new strategies bring uncertainty to an industry sector, it is necessary for it to be agile to change and be willing to be open to new ideas (and not just in powertrain) – This is something that a conservative-leaning sector, like automotive, is profoundly weak and will face further upheaval, as Tesla (backed by $963 billion of market capital), makes further in-roads to market share.

Kevin Mak is a Principal Analyst in the Global Automotive Practice at Strategy Analytics, covering the Powertrain, Body, Chassis and Safety service.
Strategy Analytics publishes the OEM Hybrid and Electric Vehicle Strategies report every year, including the 2021 edition, OEM Hybrid and Electric Vehicle Strategies: Global OEMs Plan For All-Electric Future.
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