Volkswagen Sees EVs As Key To Making U.S. A Reliable ‘Third Leg’

Volkswagen has been trying to join the top tier as a domestic automaker in the United States beginning with its ill-fated assembly-plant venture in Westmoreland County, Pennsylvania, in the 1980s. The German automotive giant opened a new factory complex in Chattanooga, Tennessee, in 2011, to service U.S. demand, and it turns out high-quality vehicles that serve two major segments of the market.

But VW is still, in essence — more than a half-century after the Beetle became a sensation here, and 34 years since it closed Westmoreland — trying to figure out the American automotive consumer and to find a reliable long-term path through the market.

It turns out that the sputtering of the Chinese auto market, the endangerment of natural-gas supplies for the German economy in the wake of Russia’s invasion of Ukraine, and the passage of the U.S. Inflation Reduction Act granting tax credits for buying domestically produced EVs may have combined to nudge Volkswagen into a new opportunity to step up its embrace of the American market and investment in its future.

“We’re diversifying a bit from China and a bit from Europe and building up the United States as our third leg of the market,” Reinhard Fischer, strategy chief for Volkswagen Group of North America, told me recently. “That’s the global view.”

Fischer, one of the masterminds of the stunning growth and success of VW’s Audi luxury brand in the United States, added, “The more that you spread out your footprint, the bigger is your independence from certain areas. We wanted to grow North America to be the third leg of the stool that the group worldwide can stand on.”

Volkswagen began building the Passat sedan when it opened Chattanooga in 2011 and more recently added production of its Atlas large SUV. But the most important thing VW is likely to build at its uber-sustainable Tennessee complex is its ID.4 all-electric car, which the company just started producing this year as all the new geopolitical and strategic factors came to bear. VW also has some engine and assembly plants in Mexico.

“To achieve our objective of wanting to make our group presence in North America stronger, the way to do it now is through electrification,” Fischer said. “That’s where we have very strong strategic plans. In the next several years we will be introducing many new EV models to the U.S. market, and we’ve also made the announcement that we’re going to spend more than $7.1 billion in building up our industrial base here.”

Fischer continued, “Electrification gives us a chance to accelerate here” in the U.S. “It was part of the success of Audi, and now my focus is to repeat this with the VW brand and uplift the whole VW group.”

He noted that the American consumer is doing its own acceleration in embracing EVs. Battery-electric vehicle sales have been up significantly in 2022 compared with a year ealier, while the overall market is down. “And the more we brand into popular segments with new EVs, the more consumers will come,” Fischer said. “As white space becomes filled, consumer interest is going to continue to grow.”