At Volkswagen’s ceremony celebrating the start of ID.3 production, CEO Herbert Diess made several comments on the electrification of the industry. In particular, he stated that batteries, as opposed to hydrogen, are a quicker and cheaper way to reduce automotive industry emissions. He also called for a price on carbon and committed to reducing his company’s fleet carbon emissions by 30% by 2025, and to zero carbon by 2050.
German Chancellor Angela Merkel also spoke at the event. She called for the German government to increase electric car incentives and set a target for the country to install a million public charging stations by 2030 to fuel 7-10 million German EVs by the same year.
Herbert Diess replaced Matthias Müller as VW CEO last year, due to the latter’s involvement in VW’s “dieselgate” emissions scandal.
Diess’ comments on hydrogen focused on current viability of the technology. Currently, hydrogen is significantly more expensive than batteries, and the cost curve for hydrogen isn’t improving as quickly as batteries are.
In the US at least, hydrogen costs ~$15/kg. A kilogram of hydrogen can drive a fuel cell vehicle about 60-70 miles, which makes hydrogen costlier than gasoline as a fuel. But most hydrogen cars come with free fuel as part of the lease, to obscure this cost to consumers.
These costs could come down with scale, but Diess stated that “for the foreseeable future,” hydrogen would remain expensive and thus not viable in the consumer space.
Diess sees hydrogen still being competitive in trucks, shipping, and industrial applications in the next decade. It will be able to replace fossil fuels in those spheres, but will only represent an improvement if hydrogen can be produced through excess renewable energy.
Currently, about 95% of hydrogen is produced directly from fossil fuels through steam reforming and other methods. It is also possible to produce hydrogen through electrolysis (not the hair removal process, but a chemical process involving running electricity through water), though this is not yet being done at a significant scale.
If hydrogen were produced through electrolysis with renewable energy, fuel cells could be more sustainable than they currently are. But the peak theoretical efficiency of fuel cells is lower than the current real-world efficiency of EV batteries, so fuel cells will never be more efficient than battery-electric vehicles, though may offer other advantages (such as energy density, for shipping).
Diess stated that VW, and the greater German auto industry, needs to “change toward electrical mobility fast so that we can take the role of forerunner worldwide on this technology.”
To make this shift work for the consumer, Diess proposes two things: a price on carbon and more public charging points.
A price on carbon would have the effect of making lower-carbon transportation more economical, because it would finally put a price on the externalities caused by polluting fossil-powered transport.
Public charging points are important for EVs because they are currently in relatively short supply, leading to the perception among non-EV drivers that there’s nowhere to charge their car. In practice, most EV drivers charge at the same spot most of the time, whether that be work or home, and thus public charging is less important than public gas stations.
Nevertheless, more and faster charging stations will be a benefit for EV adoption. Merkel echoed this point by setting a goal of having a million public charging stations in Germany by 2030.
In addition to this target, Germany wants to increase incentives available for EV purchasers. Currently EV buyers get €4,000 from the German government, and plug-in hybrid buyers get €3,000, on cars with a base price under a certain threshold. Under the new plan, all incentives would increase by 50% over the course of the next five years, and new incentives would be added for vehicles above the previous price threshold.
Germany’s EV incentive program has been less successful than hoped, though this is largely due to the exclusion of Tesla, the best-selling EV brand in Germany. This has led to the perception that Germany purposefully set the base price threshold for the incentive at a level that excludes Tesla alone, as a protectionist measure for European auto brands.
The fact that Germany is considering increasing their incentives on the very same day that the country’s largest company starts production on their first real electric vehicle, and soon after other German companies have started producing higher-priced EVs like the e-tron and Taycan, certainly does little to dispel that perception.
Diess’ comments can be seen in this video. The timestamp marks the beginning of his comments on electric cars:
It’s really nice to see a high-level auto executive who “gets it.” The CEO of VW, the world’s largest automaker, has a big megaphone when it comes to influencing both German policy and the world auto industry as a whole.
We often see auto executives who just have no idea about the capabilities of electric cars, the direction the industry is going, what their new competitors are up to, or the right direction to point public policy.
VW has been one of these companies in the past, when they spent years cheating on emissions tests in an effort that cost consumers billions of dollars and thousands of lives. They were punished for this (perhaps not enough), but they’ve come out of it making big statements and big investments in EVs.
So far, they don’t have enough EVs on the road or on the dealer lots, but on balance, they seem to be one of the most serious automakers out there. And today’s comments calling for a carbon price, and showing real knowledge about the benefits and downsides of fuel cells, were refreshing from Diess. It’s certainly better than Toyota’s take of investing in and marketing fuel cell technology that they know isn’t any good for passenger cars.
But as always, the most important thing is to get the cars onto the road, in numbers. VW’s ID.3 should be an easy sell — it’s got the right specs and price and looks good enough. But whether or not VW will put in the effort to produce and sell enough of them to make a dent in the fleet emissions of the 10 million cars they sell annually remains to be seen.
VW has done the first step of being taken seriously — aligned investments and public statements with the reality of where the industry is going, and shown that they’re being steered in the right direction. Now they need to execute.
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