With electric pickup, SUV, Volkswagen looks to get its mojo back and invest in Canada

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Herbert Diess, CEO of Volkswagen, introduces the Volkswagen concept car ID Vizzion during its launch at the Beijing Auto Show on April 25, 2018.WANG ZHAO/Getty Images

It’s been a long time coming, but Volkswagen is trying to get its mojo back in North America. There’ll be a new electric hippie bus, and the rebirth of a storied brand, Scout, that will build an electric pickup truck and rugged SUV.

“We’ve got to get the brand loved and iconic again,” said Scott Keogh, chief executive of Volkswagen Group of America Inc., in a wide-ranging interview with The Globe and Mail. “The factory is one thing, profitability is one thing, product portfolio is one thing, leading on electrification is one thing – these are all good things, but we’ve got to get the brand back to where it belongs.”

Volkswagen Group is barely second to Toyota when it comes to being the world’s largest automaker. But so far this year in terms of sales by manufacturers, it ranks No. 8 in Canada, and in the first quarter of 2022 ranked No. 10 in the United States, according to Good Car Bad Car. Last year, there were just over 60,000 Volkswagens sold in Canada and 375,000 sold in the United States. About 40 per cent of the automaker’s sales are in China.

Keogh’s comments came on the heels of his boss telling 60 Minutes that “we have to become relevant in the US”

“It’s difficult,” said Volkswagen Group chief executive officer Herbert Diess, in a conversation last month with journalist Leslie Stahl on the CBS news show. “First of all, I have to accept, we lost ground here in the US I think we didn’t take the US customer seriously enough. We tried to sell the European product here in the US”

In North America, VW is best known for the Beetle and the hippie bus. Its other vehicles, such as the Golf, Jetta and Passat, are well-received, but do not have iconic status. Volkswagen has a plan to change that.

First, it committed itself early to a future of electrification. The carmaker was forced to turn around the company after the 2015 Dieselgate scandal, in which it admitted to rigging emissions testing and eventually paid more than US$30-billion in restitution and recalled 11 million cars. At the same time, it restored its assembly plants in the US and Mexico to make popular SUVs like the Atlas and Tiguan. It also lowered its prices, accepting that buyers would not pay a premium for a non-luxury European car. Now, it is introducing the ID.4 electric car, which is currently built in Germany, but will begin local production later this year at VW’s plant in Tennessee.

Volkswagen also announced this week that it will bring an all-electric small pickup truck and a rugged electric SUV to the North American market, under the Scout brand name.

“Electrification provides a historic opportunity to enter the highly attractive pickup and R-SUV segment as a group, underscoring our ambition to become a relevant player in the US market,” said Diess in a statement Wednesday.

The storied Scout brand was operated by International Harvester from 1961 to 1980, and acquired by VW when it bought the remains of International two years ago. The Scout was a four-wheel-drive alternative to Jeep and Land Rover, and the new Scout will be an American competitor to the hugely successful Jeep Wrangler and Ford Bronco.

This will be the first time Volkswagen has launched a new brand in the US Production is scheduled to begin in 2026.

Regionalization is important for a global company like Volkswagen, to help stabilize the cost of building in the markets where its vehicles are sold, said Keogh. Volkswagen’s two North American factories in Chattanooga and Puebla, Mexico, make about 94 per cent of the vehicles it sells in this region.

“We import what I would call ‘the candy’ – the Golf Rs, the GTIs, the Arteons,” said Keogh, “and of the vehicles we make in this market, about 85 per cent of the supply base and materials is localized here . And by ‘localized here,’ (I mean) heavily Mexico, heavily United States, a little bit Canada.”

That may change, which helps explain Keogh’s visit.

Volkswagen announced it will revive the storied Scout brand and under it build a pickup truck and rugged SUV for the North American market.Handout

Volkswagen Group recently announced US$7.1-billion in investment for North America, almost all of which is earmarked for upgrading the two existing assembly plants and an engine manufacturing plant in Mexico to produce electric vehicles and powertrains.

Keogh said that is just the investments they have on the books. “One of the reasons I am here is to continue to look at opportunities in Canada. Whether it’s on the battery side of the equation or the mining side of the equation and the materials that go along with that. I think Canada as a country is doing an amazing job positioning itself, and positioning its ecosystem in the broader term.

“Make no mistake: we view ourselves as a region, and it’s smart business to balance your region: balance it from a currency point of view and, frankly, what markets can do things better.”

In Quebec, General Motors is building a $500-million EV battery materials plant, to take advantage of local access to battery minerals. In Ontario, Stellantis – the company that owns Chrysler and Jeep, among others – announced a $5-billion battery plant in March, to be built with LG Energy Solution Ltd. It’s the largest investment in the history of Ontario’s auto sector.

“As we secure game-changing investments,” said Ontario Premier Doug Ford when announcing the Stellantis project, “we’re also connecting resources, industries and workers in northern Ontario with the manufacturing might of southern Ontario to build up home-grown supply chains .”

None of this is lost on Volkswagen North America.

“We are right now undergoing the single biggest, I would say, industrial transformation, in invest sense, in a hundred years,” said Keogh. “At a minimum, we’re looking at battery production in America today (for all new vehicles), right now, of maybe 700,000 or 800,000, and that’s going to need to move to eight or nine or 10 million in seven-and- a-half short years.

“It’s not like we can just pick up the phone and say ‘send this to us.’ This is deep mining, deep infrastructure, profound logistics and profound USMCA (United States-Mexico-Canada) implications going back and forth. There are massive opportunities for industrialization in the entire region.”

But even with billions of dollars of investment, how does Volkswagen stand out as an automaker in a crowded market?

“The next vehicle we will be launching will be the Aero – I would call it a very sleek, sort-of sportback type of vehicle,” said Keogh, referring to the Aero B all-electric concept that was first seen as the ID. Vizzion concept at the 2018 Geneva Motor Show. It’s intended as direct competition for the Tesla Model 3, with a range of 700 kilometers and a production release late next year.

Dr. Herbert Diess and Scott Keogh, president and chief executive officer of Volkswagen Group of America Inc. attend SXSW 2022 to discuss the newly-unveiled ID.Roger Kisby/Getty Images

“The vehicle after that will be the ID.Buzz, and then the next major project we’re working on, which will be localized in this (North American) region, will be a mid-sized SUV, more in the Atlas zone. ”

And the mojo? That’s where the funky ID.Buzz comes in, with a release date here in 2024. It’s an all-electric mini-bus that will, Keogh finally confirmed, also be offered as a factory-built camper van.

“Reaction to the ID.Buzz has been breathtaking,” he said. And the California camper version “will come either with the launch or a little bit after the launch. There’s no way you can have a California that can’t be sold in California, so we’ve got to do it.”

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