Cutting carbon, meeting real-life emission tests, new electric cars to hurt profits, VW says

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Exhaust emissions from tailpipe [photo: Simone Ramella, 2005, used under Creative Commons 2.0]

Exhaust emissions from tailpipe [photo: Simone Ramella, 2005, used under Creative Commons 2.0]

Well, that's awkward.

At its annual media briefing on Wednesday, Volkswagen Group executives said the costs of meeting new emission tests in the EU, lowering carbon emissions globally, and launching multiple new electric models would eat into the company's profits.

With the company's diesels in disfavor even in Europe and unlikely to reappear in North America, VW brand chief Herbert Diess said the costs of cutting carbon emissions "pose the greatest challenge for us as a company" through 2020.

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The comments were reported by Reuters following the event, at which VW Group CEO Matthias Mueller said the company had secured contracts for 20 billion euros ($25 billion) of lithium-ion battery cells for its future electric vehicles.

Those lower profits will come, the executives said, despite projected record sales above 10 million vehicles globally.

Following the Volkswagen diesel scandal that broke into public view in September 2015, the European Union has moved to a system of tougher emission tests that include real-world driving.

Portable Emissions Measurement Systems (PEMS) on a Peugeot 308

Portable Emissions Measurement Systems (PEMS) on a Peugeot 308

The next test regime, known as Worldwide harmonized Light-vehicle Test Procedure or WLTP testing, has imposed "heavy financial demands" on the Volkswagen brand, according to CFO Arno Antlitz.

The Volkswagen brand accounts for the majority of the huge VW Group's research and development spending for carbon reduction, emission testing, and electric-vehicle development.

Concerns over the continuing costs of the diesel scandal and development of new electric vehicles were echoed by the head of the Audi brand, Rupert Stadler.

“The switch to the WLTP cycle is proving extremely challenging," he said, according to British outlet Autocar, "but we are currently doing type approval for engine and gearbox variants."

Audi plans to reduce the number of engine and gearbox combinations in high-volume models by up to one third, he noted.

It will further reduce costs by cooperating with its internal rival Porsche on a shared common architecture, known as PPE, for larger and more costly battery-electric vehicles from both brands.

Porsche Mission E concept, 2015 Frankfurt Auto Show

Porsche Mission E concept, 2015 Frankfurt Auto Show

Porsche executives told Green Car Reports last week the PPE component set encompassed elements of both the P1 platform under the future Porsche Mission E and the MLB-Evo architecture used for the 2019 Audi e-tron electric SUV that will go on sale late this year.

Nonetheless, the rapidly evolving future faced by every automaker imposes costs for reducing carbon emission and developing new plug-in electric models.

The VW Group has the additional burden of dealing with continuing concerns and regulatory issues over its 10-million-plus diesel vehicles on European roads, not to mention a German criminal investigation into the emission cheating that is now in its third year.

Despite group and individual-brand improvements in competitiveness, said VW executives, the Volkswagen brand will face "severe challenges ... this year and over the next few years."

 
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