Underwriting the success of the electric car portfolio of the world's largest car manufacturer, the Volkswagen iD Neo needs to succeed. The key to its success will be its retail price.
Electric Quandry
The quandry for any vehicle manufacturer is features versus price.
Build a cheap car, and it will sell, in high volumes, with low profit margins.
Build an attractive expensive car, and it will sell, in low volumes, with high profit margins.
Build an attractive SUV, and it will sell, in good volumes, with good profit margins.
So how do you begin to sell an electric car?
Tesla showed us the way, by getting people excited about a fast exotic electric sports car based on a Lotus, and selling it to the rich, to prove the business case that people would buy electric cars.
Next came the Model S, a luxury four door sedan, that was also fast, electric, and more attractive to people who have more than one friend. The original Tesla Roadster sports car only had two seats.
The Model S had 5 seats, and in some markets sprouted two more seats in the trunk, only suitable for children, giving it a total of 7 seats.
The next in line was the Model X, a large SUV with Falcom Wing doors, and choice of 5 or 7 seats. Tesla struggled to produce the door mechanisms, and learnt lessons on keeping things simple.
Coming up next was the Model 3, meant to be a mass-market electric sedean for the whole world. It was meant to be good quality, spacious, electric, affordable, and have good range. It debuted to much acclaim, and created a waiting list of 400,000 orders. It seemed Tesla had cracked the code.
However, in the midst of trying to produce 400,000 cars, Tesla had to borrow money, increase production, hire more workers, install more robots, and create new production lines. It was expensive, it took time, and it took far too long.
Instead of the Model 3 becoming an instant hit, the Model 3's gestation period took far too long, and changed its content several times. Customers began cancelling their orders.
When examples of t he car arrived to customers, they were the more expensive versions, with lots of options, and higher profit margins. The mass market $35,000 electric car we were promised, was delivered first to those who added options, bringing the average price above $50,000.
Many who ordered the base model are still waiting for their car to arrive.
Volkswagen iD
Enter Volkswagen, the world's largest car manufacturer by units sold, with brands including VW, Skoda, Audi, Porsche, Bentley, and Lamborghini.
When Volkswagen Group hit the headlines with electric brand "iD" it was to known for new electric cars and electric versions of the popular Microbus.
With odd names like the iD Neo, iD Crozz, iD Buzz, iD Vizzion, they were a little strange and a little quirky. The most popular model in the range was the new electric Microbus, to be known as the iD Buzz, customers wanted it now now now, but have to wait until 2022.
Volkswagen iD Neo
The iD Neo is the most compact and sensible of the range, similar in size to the VW Golf. Sure to be a sales success, it tones down the outlandish styling for something appealing yet accessible, without looking wierd.
Backing up its success is its apparent starting price. Priced from just €20,000 (Euro), without government subsidies, it should be a mass market affordable all-electric car with enough prestige and style to sell well.
Tesla is still struggling to fulfil backorders of its Model 3 small sedan, starting with the higher-value and higher-margin orders, and working their way down to the base model $30,000 versions. Tesla needs to fulfil these orders and have them on the road (and the retail price in the bank) before 2020, otherwise they will see customers cancel orders and switch to cheaper and more stylish offerings from other brands such as VW.
Volkswagen Electric
As VW Group tries to cover all its bases, from Skoda to Lamborghini to Bentley, with each brand needing an electric pathway, and a range of size options from very small to very large to very fast, VW Group has possibly the biggest challenge and the biggest economy of scale ahead of it.
Underlying each car will be a modular platform, a skateboard, on top of which you can build any body style you like. Expect small cars from Skoda, VW, and Seat to be based on the MEB small architecture.
The next size up, similar to the Golf, will have another MEB platform variant, underpinning cars like the VW Golf, Audi A1, Audi A3, Skoda Octavia, and others.
Next in line will be the MEB electric sedan platform, for cars like the VW Passat, Audi A4, A5, A6, Skoda Superb, and so on.
Next will be the medium SUVs, large SUVs, large sedans, and after that, the sports cars from Porsche and Lamborghini, Bentley, and the Audi R8.
Lots of challenges, and lots and lots of opportunities.
Also, lots of ways for things to go wrong, and break a lot of cars sharing the same underpinnings.
VW needs to get it right, and get it done fast.
Off to a good start: the VW iD Neo
Getting off to a good start will be essential for the iD brand.
The VW iD Neo will be the one car with the most weight riding on it in terms of expectations from the management group at Volkswagen.
It will be the car by which all other electric iDs are held to standard. If it is a success, likely all other iD variants will succeed too. If it fails, then it will be a lot harder to sell a bigger and more expensive version to a skeptical public.
Read more about the iD Neo here.
Until next time,
Xavier Zymantas XYZ Electric
