Electric Golf Cheaper than Gasoline and Diesel Versions
Dear Friends & Shareholders,
In September, the prices for new cars in Germany showed a little surprise: Volkswagen sold the mid-range e-Golf for 20,760€ ($22,790), net of subsidies. At this price, the e-Golf was around 1,000€ cheaper than the entry-level combustion engine model. VW originally offered the e-Golf for 35,900€; compared to this, the current price discount is more than 40%.
Professor Ferdinand Dudenhöfer, a recognized car expert, explains the bargain price with the fact that the e-Golf has so far sold rather poorly. Even more important, however, is the fact that production of the ID.3 has already started. This is the first vehicle from VW to be designed as an electric car from the outset. The ID.3 starts at prices of just under 30,000€ and has a range of around 300 kilometres (186 miles). The e-Golf has to return to the charging station after just 233 kilometres. In view of the forthcoming sales launch, the e-Golf will probably only be sold at considerable discounts.
Cost parity achieved
While the e-Golf is only cheaper than the cheapest petrol engine due to the considerable discounts, the ID.3 genuinely achieves cost parity. The New York Times recently reported that VW buys battery cells for 90€ ($100) per kilowatt hour. This is considered by experts to be the threshold below which electric cars are no more expensive than comparable cars with petrol or diesel engines. VW achieves the low price through the immense number of battery cells that the world’s largest car manufacturer buys.
The costs for electric cars will also drop noticeably elsewhere primarily due to rising unit sales. VW has allegedly invested 4€ billion in the development of its Modular Electric Drive Matrix, or MEB, as it is abbreviated in Germany. Their entire future fleet of electric cars, from small and compact cars, to saloons, vans and SUVs, is based on their MEB platform. VW subsidiaries, Seat and Skoda, will also be launching vehicles based on the MEB platform in the near future. Dudenhöfer believes that by 2021, VW will produce around 350,000 electric cars per year. The company needs this number of units in order to comply with the greatly reduced upper limits for CO2 emissions.
The high number of units naturally reduces the proportionate development costs per vehicle. At the same time, purchasers have enormous negotiating power vis-à-vis suppliers – the motto here is: Size Matters.
VW is driving these economies of scale even higher by offering the MEB to other manufacturers. Ford has already hit the mark and ordered 600,000 MEBs for its first electric car in Europe. A second order from the American company is supposedly imminent. But other companies are also pushing ahead with cooperations in order to spread the billions in development costs for electric cars over as many units as possible. Porsche, for example, is doing business with Audi. The two companies are working together on a common electrical platform. BMW and Mercedes are discussing whether they will jointly purchase components, such as batteries or power electronics, in the future. This is already happening with other parts. After all, the volume already amounts to around 5€ billion per year.
This shows that, after VW, other manufacturers will soon achieve cost parity with their electric cars. This could mean a breakthrough for electric cars on a broad front. Former Daimler boss, Dieter Zetsche, once said about the expected sales of electric cars: “Electric mobility is a bit like turning the ketchup bottle upside down. You know that it is coming, but not when or how much. We are convinced now is the time to fully jump in.” Next year we will know for sure.