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Volkswagen Changes Course: Fewer Diesels, More Electric Cars

By John Rosevear - Oct 13, 2015 at 6:40PM

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The new leaders of the mass-market VW brand have a plan to get past the emissions-cheating scandal. That plan involves fewer, cleaner diesels -- and a lot more hybrids and electric cars.

VW's current electric-car offering is the e-Golf, with a claimed range of 83 miles. Just 2,555 have been sold in the U.S. this year through September. But VW may be about to up its electric-car game in a big way. Image source: Volkswagen

How will Volkswagen (VWAGY -0.61%) get past the emissions cheating scandal?

With electric cars, it turns out.

On Tuesday, the leaders of the VW brand gave an overview of their plans for the future. It's short on details, but the overview hints that VW is moving away from its reliance on diesels -- and preparing to step up its electric-car efforts in a big way.

Big changes to VW's "toolkits"
Before we talk about electric cars, a bit of background:

Unlike most automakers, which base models on "platforms" or "architectures," Volkswagen builds many of its vehicles from what it calls "toolkits." These are sets of pre-engineered modular components that can be mixed and matched to create new vehicle models. In a sense, it's like building cars from Legos -- but each "Lego" is a fully engineered section of a vehicle. The upshot is big savings in product-development costs, and big economies of scale from all of the shared parts.

VW has a few different toolkits, but the most important is what it calls Modularer Querbaukasten, or "MQB." That translates as "Modular Transverse Toolkit," with "transverse" referring to the mounting of the engine. MQB is used for small and midsize front-wheel-drive and all-wheel-drive vehicles, including the Audi A3 and VW's Golf, Jetta, and Passat -- some of the company's best-sellers. 

VW's new push into electrification starts with MQB -- but it doesn't end there.

Coming soon: More electric cars and hybrids
VW said on Tuesday that MQB will be developed to accommodate "plug-in hybrids with an even greater range" as well as "high-volume electric vehicles with a radius of up to 300 kilometers."

It's unclear what VW means by "radius" (the company's official English statement was translated from the original German), but assuming that it means "range," 300 kilometers is about 186 miles.

That's right in line with where rivals are aiming their mass-market battery-electric cars in the near term. General Motors, Nissan, and Tesla Motors are all expected to launch BEVs with roughly 200 miles of range and prices around $30,000 to $40,000 over the next few years.

But the most significant words in that part of the statement might be "high volume." VW isn't thinking in terms of hundreds, it's thinking in terms of tens of thousands -- or more.

Coming a little later: A whole lot more electric cars
VW's statement said that it will begin development of a new toolkit called "MEB." This will be all-electric, a "multi-brand toolkit suitable for both passenger cars and light commercial vehicles... designed for all body structures and vehicles types, thus allowing particularly emotional vehicle concepts, and will enable and all-electric range of 250 to 500 kilometers." (155 to 311 miles).

It also said that the upcoming new version of VW's flagship sedan, the Phaeton, has been "redefined" as an electric car with "long-distance capability ... as well as an emotional design."

The original Phaeton was an expensive ($70,000-plus) luxury sedan intended as a technical showcase for the VW brand. An upcoming new one was expected to follow similar lines, with gasoline and diesel powerplants -- but it appears that the new Phaeton will be reworked into something more like a Tesla competitor.

"Repositioning" VW "for the future"
Before the scandal broke, the Volkswagen company was clearly making big moves toward electric cars. An all-electric Audi SUV is planned for early 2018, and a hot electric Porsche sedan is thought to be on track to arrive a year or so later. The scandal led some, including your humble Fool, to wonder if VW would have to scale back the program to save money. But I also thought that VW might choose to double-down on electric cars as a way to move past the scandal.

That may turn out to have been a good guess.

The CEO of the VW brand, Herbert Diess, summed it up in a statement: "The Volkswagen brand is repositioning itself for the future. We are becoming more efficient, we are giving our product range and our core technologies a new focus, and we are creating room for forward-looking technologies by speeding up the efficiency program."

Unlike a lot of Volkswagen executives, Diess isn't a VW lifer. He was BMW's research and development chief until Volkswagen hired him away to help turn around the VW brand, which has been struggling. He officially started on July 1, just a couple months before the scandal broke. 

That outsider status -- and the scandal -- has given him some leeway to make big changes. Could this turn out to be the catalyst for a broader industrywide move into electric cars? We'll see, but don't rule it out.

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