Herbert Diess’s surprise removal from Volkswagen (VOW.DE) shocked the automotive world. But it may also be an indication that one of the biggest trend shifts in the industry, might be slowing down as opposed to speeding away.
Diess was a big architect of the massive EV (electric vehicle) transformation happening at VW, one that would likely see the company spend $90 billion to $100 billion on new plants, R&D, battery materials, and employee investment.
Diess’s aggressive EV transformation push, which left little room for compromise, rubbed VW insiders the wrong way as well. His plans for cutting jobs in order to change the company’s workforce and operations at VW angered labor unions in Germany, which represent about half the seats on VW’s board. The final straw was apparently a delay in rolling out software for EVs across the VW portfolio, from a subsidiary unit that Diess was heading.
Oliver Blume, Porsche’s CEO will take over for Diess. Blume is reportedly known as a consensus maker, and while the Porsche brand has gone EV with certain models, it still has no plans to fully electrify the 911 sportscar.
VW’s move to remove its EV-driven CEO is perhaps the latest sign that the industry may be pushing too hard into an electric future that it may not be ready for yet, or at the very least customers, and governments are not ready for either. Just last month Germany rejected the E.U.’s mandate to ban fossil fuel cars from 2035, pushing back on a pledge the country once backed.
Warnings from the industry
Earlier this year Stellantis CEO Carlos Tavares cautioned that moving too fast with EVs, and shutting down ICE (internal combustion engine) cars could be a problem for an industry that is trying to meet lowered carbon dioxide mandates.
Exiting the ICE business could be a huge mistake, he said, because it is that business that is funding an EV transformation. And from his point of view it is gas-powered cars that most people can afford to buy.
“The global warming issue is limited by the household income per capita, which then if you don’t complement this strategy with a strategy where you take the clunkers out of the road, and replaced by modern vehicles, even if they are less electrified, but you keep their affordability — then you are missing something,” he told Yahoo Finance in an interview.
BMW (BMW.DE) CEO Oliver Zipse also has been wary of pushing the EV gameplan too fast, too soon. He had said in the past that bans of ICE-powered cars aren’t the right solution.
“If someone cannot buy an EV for some reason but needs a car, would you rather propose he continues to drive his old car forever? If you are not selling combustion engines anymore, someone else will,” Zipse said earlier this spring in New York.
Toyota (TM), the world’s largest automaker, has been late to the EV game but in recent months has said it will invest $35 billion in an EV transformation. But that hasn’t stopped CEO Akio Toyoda from pumping the brakes on Japan’s goals of banning ICE-powered cars by 2035, lobbying the government to include hybrid-powered cars as “so-called electric vehicles,” meaning they would be allowed under the rules.
Previously Toyoda was concerned about the state of current EV infrastructure, and that EVs were too expensive for regular people, before changing course last December.
Ford (F) CEO Jim Farley has been charging hard in transforming the nearly 120-year old company into an EV powerhouse. He has split the company into two divisions, Ford Model E and Ford Blue, with Model E housing the EV business. Farley said Ford will invest $50 billion through 2026 to fund the process.
Though Ford received positive commentary from analysts and investors for the move, it will reportedly lead to 8,000 job cuts in the ICE part of the business, a massive reduction for the company that has around 31,000 salaried workers.
Stellantis (STLA) CEO Carlos Tavares believes that when governments and labor unions like those in Germany see the real “costs” of electrification, there might be a reckoning.
“We’ll start moving, but then the society in which we operate needs to accept the fact that when the car industry starts to [move] fast, if there is some kind of collateral damage – it’s because we needed to move,” he said.
Most analysts believe the EV transformation of the global transportation system will be a matter of when, not if. Recent news however, notably the firing of one of the biggest EV evangelists in the industry, has highlighted the challenges that still remain.
—
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
Source: https://finance.yahoo.com/news/vw-ceo-ouster-a-sign-of-speed-bumps-ahead-for-ev-transformation-145014619.html