VW brand CEO Thomas Schaefer eyes strong profits from small EV

Thomas Schäfer has enjoyed a steady rise at the Volkswagen Group since joining Europe's largest automaker from Daimler in 2012.

He was promoted to lead Skoda in 2020, and in April 2022 he was named COO of the VW brand. By July he was CEO. One of Schäfer's first moves was to commission a concept previewing VW's new entry electric car that he wants to cost less than 25,000 euros ($27,300).

Unveiled in Hamburg, Germany, in March, the ID2all hatchback has design cues connecting it to popular VWs of the past as the brand works to bring its EV prices down to levels comparable with its combustion-driven cars. Schäfer took questions from Automotive New Europe Correspondent Nick Gibbs and other journalists following the unveiling of the ID2all concept. Separately, Schäfer spoke one-on-one with Frank Johannsen, a reporter at ANE sister publication Automobilwoche. Edited excerpts from both interviews are below.

The car based on the ID2all concept will have a starting price of less than 25,000 euros. Can you achieve good margins at that price?
We cannot have margins below 6 percent. With the scale we have with four vehicles from three brands [on the same MEB Entry platform] -- two from VW, one from Cupra and one from Skoda -- I guarantee we can. We are not a charity. We intend to make money.

Will all four EVs cost less than 25,000 euros?

No. [The ID2 hatchback] is the entry model for the time being and the second one from Volkswagen will be an SUV-ish vehicle. The Skoda will be an SUV, and then you have the Cupra Urban Rebel. They won't be under 25,000 euros.

You have said they will be built in Spain. Will all of them be made in one plant?

This vehicle will be produced in Martorell, Spain, on the same line as the Cupra [Urban Rebel], with the other [VW model] being made in Pamplona, Spain, starting in the second half of 2025. [The Skoda model will also be built in Pamplona]. So, both factories will be converted to produce electric vehicles. Spain will be super-utilized. The shared battery systems will come from Sagunto [VW's new battery plant near Valencia], so it will be the perfect industrialization of Spain.   

What volumes can you build?

We don't make cars below 100,000. We normally dimension our factories for 150,000 -- 30 jobs per hour -- but we can then double to 300,000, so we are flexible. The battery capacity will be the deciding factor in the ramp-up.

Sagunto won't be ready until 2026. Where will your batteries come from until then?

We can supply from our other factories in Salzgitter and from Northvolt with NMC [nickel manganese cobalt] and LFP [lithium iron phosphate] chemistries.

Can you make the batteries cheap enough?

The new Unified cell from our PowerCo subsidiary will be scaled across all models, factory by factory. That will give us a real cost advantage. The Unified prismatic cell gives us enough density, and we think it's going to be the industry standard going forward. To get a car below 25,000 euros that has no compromises with safety and range is literally impossible at the moment.

Will you sell the Unified cell to other manufacturers?

Yes.

Will the ID2 go to China?

Probably not because hatchbacks are not popular in China, but [MEB Entry-based models] will be rolled out globally, probably. This [small EV hatchback] is mainly a European vehicle.

Why did you decide to change the design of your small EV from the retro look of the VW Life concept that appeared in 2021 to the more familiar looks that the ID2all concept has?

The previous vehicle design was created at a time when people really wanted to be different and to reinvent Volkswagen, so to speak. That may have been right at a time when cars with combustion engines and EVs run in parallel. But then we have asked ourselves: What will characterize a VW in the future and how is this reflected in the design? Our new head of design, Andreas Mindt, put it in a nutshell: stability, likeability and excitement. It's also about precision, clean lines and top quality.

Automakers have done well selling higher-specced vehicles in the last few months. Can you go higher with the production version of the ID2?

Andy [Mindt] is already speaking about a GTI version. We can move up the price ladder with various models. What we are definitely not going to do is repeat what we did in the past and sell a confusing amount of variants.

Is the ID2 in actually the new Polo?

I wouldn't categorically say no, but at the moment it's not the preferred choice. The question is: What will the Polo cost after Euro 7 [emissions regulations] take effect? We don't know yet. If you look at what the European Union posted about Euro 7 last November, then smaller combustion engine vehicles will become prohibitively expensive. At the moment, you can buy a Polo with a manual gearbox and 1.0-liter engine, but under Euro 7, this would be not be possible anymore. You need an automatic gearbox and you need hybridization. The future of Polo depends on the outcome of Euro 7.

Do you think the European Commission will backtrack on some of the most expensive aspects of Euro 7?

We had lots of discussion through the VDA and so on, and I must say there were a lot of misunderstandings. In the engagements we've had recently, I got the feeling there is an amicable solution on the horizon. I hope so. We would rather put our money into electrification during the final years of the combustion engine than make a final version of it that is prohibitively expensive.

When do you plan to start sales of a sub-20,000 euro electric car?

It has to come by 2026-27 at the latest. This [an EV at that price] is the real Champions League. For VW, it is almost an obligation for us to get this right. We have to make a car that is affordable. This is not a something that you can solve quickly without making compromises on the values of our brands.

Would this car also use the MEB Entry platform?

Probably not. Partnering could be an option, but given the scale we have we will probably do it ourselves. We're looking at a couple of options at the moment. It's too early to say. It's different terrain, especially if you still want to make money

How do you make money on a cheap electric car?

Either you solve the riddle with scale, downsize the battery, or you find a partner and scale it even more. It's not clear yet. We have four working streams in parallel at the moment.

Until the 20,000 euro car arrives, the e-Up is your entry EV. How long will you continue to build it?

Unfortunately, it will be discontinued in mid-2024 because of the new UNECE rules for cybersecurity. To keep it in production we would have had to integrate a completely new electronic architecture. That would be too expensive. So, it's better to develop a new car right away.

Who is leading the development of the 20,000-euro car?

VW brand with Skoda. It's a joint project, but it is one of the working streams that Skoda is leading. We are looking at other regions to see if it's possible in those regions.

Which region is Skoda leading? You've said not China, so India?

For example.

What you do you think about Germany's [subsequently successful] bid to modify the 2035 EU combustion engine ban to include cars powered by e-fuels?

That's unnecessary noise from my point of view. By 2035 [combustion engines] are over anyway. We said by 2033 we're done. By 2030 we plan that 80 percent of our vehicles sold in Europe are battery electric, so why spend a fortune on old technology that doesn't really give you any benefit?

Who's behind the German position? Party politics? VW Group CEO Oliver Blume?

It's not Mr. Blume behind it. I guarantee that. This discussion around e-fuels is widely misunderstood. They have a role to play in existing fleets, but won't replace EVs. That's complete nonsense. Look at the physics of making e-fuels. We don't have enough energy as it is, so why waste it on e-fuels?

Are you and Blume rivals?

Quite the opposite. We are both pragmatic people who work close with the entire team. Our backgrounds in production give us a common ground. We consistently exchange ideas because the Volkswagen brand is very close to his heart.

What is the VW brand's timing on the new scalable systems platform (SSP)?

SSP will come with the Trinity model, probably in early 2028.

What role will cars with combustion engines play as VW transitions to electric models?

Combustion engines continue to play an important role. This is how we earn the money that we need for the transformation. This year we are bringing the new Passat and the new Tiguan, next year the Tayron and then the successor to the T-Roc.

These cars will be the last new models with new combustion engines?

From today's perspective, we will carry these vehicles well into the 2030s. That will give us a good lineup. As we phase out combustion engines in Europe in 2033, it no longer makes sense to launch vehicles with completely new combustion engines.

So, the T-Roc will be your last model with a new combustion engine?

At least as things stand today. For the time being, the T-Roc is the last model with a new combustion engine in Europe that we see on the horizon. Of course, the others get will get product upgrades. But completely new vehicles with combustion engines are not in the plan after that, at least not so far.

Does that mean there won't be a ninth generation for the Golf?

Next year the Golf will get a major product upgrade. This will put it in a good position until the end of the decade. Then we have to see how the segment develops. If the world develops completely differently than expected by 2026 or 2027, then we can also launch a completely new vehicle, but I do not believe that will be the case. So far, this is not planned.

But you don't want to let model names such as Golf and Tiguan die out. Does that mean there will be an ID Golf?

It's clear that we won't give up iconic names such as the Golf, Tiguan and GTI, instead we will transfer them into the electric era. But especially with the Golf, the future model has to have the correct DNA. Simply naming another vehicle that way won't happen. We don't make the mistake. That's why we're only launching the electric Golf when it really has Golf genes. That will include a flatter roof compared with the ID3.

So, if you do an electric or ID Golf it would be on SSP?

Exactly. Before that, we won't do an electric Golf.

Could the electric SUV you plan to start making in Wolfsburg in 2026 be called the ID Tiguan?

It could be, but it doesn't have to be.

Even if it is not underpinned by SSP?

With a tall model like the Tiguan, that's possible. We can do this very well with the MEB+ platform. We are much more flexible in this respect. Whether it makes sense to do this now or later, we will have to see.