Volkswagen gambled big on the ID.3 — but will it pay off?

Alexander Migl / CC BY-SA

The ID.3 is an important car for the Volkswagen Group. Actually, it’s really important. But why is one hatchback so vital for the automotive giant’s prospects?

In the last weeks of August 2020, the first Volkswagen ID.3 s started pouring across mainland Europe. By early September, they had reached the UK. It’s been a long, long wait, made even worse by months of last-minute production hell, during which Volkswagen battled to fix persistent software issues.

But finally, it’s here. Now motoring journalists and customers are queuing up to discover how the ID.3 fares in the real world.

And back at VW Group Headquarters, there will be plenty of sleepless nights and gnawed finger nails, because the company has made some huge bets on electrification in general and the ID.3 in particular. In this two-part post, we’ll be looking at what the fuss is all about.

Let’s start by stepping back a few years.

Cracks in the ICE

For decades, the car industry rode a wave of increased affluence, consumer spending and government policies that incentivised personal transport. Of course, there were challenges — the usual cut-throat competition between companies, financial crashes and so on — but as a whole, the global industry was resilient and continued to flourish. To most outsiders, the Internal Combustion Engine (ICE) vehicle seemed destined to live forever…or at least, for decades and decades to come.

But behind the scenes, cracks had started to appear. Astute observers had been monitoring these for years, but in the last decade, these threats to ICE vehicle dominance became more obvious. The most significant related to emissions.

Governments had long been concerned about the air quality in cities, but when new discoveries showed the true impact of emissions on health, the issue gained a new urgency. Across Europe in particular, many cities announced plans to curb the use of ICE vehicles, often on aggressive timetables.

In addition, governments were looking to meet their greenhouse gas targets. The last three years has seen around 20 countries and states announcing that ICE vehicles will be phased out within their jurisdictions – in other words, new sales or imports will be prohibited. The timescales proposed vary from 2030 to 2040.

All this was challenging enough for automakers. And to make matters worse,  there was now a new kid on the block  — with some very big ideas.

The Challenge of Tesla

It wasn’t so very long ago that Tesla was a bit of a joke. You may remember, for example, Clarkson and Co having some fun at the expense of the first Tesla Roadster. There was no shortage of laughter: a niche Californian company making hugely expensive electric cars that didn’t go very far. A weirdly eccentric CEO, making barmy claims about world dominance. It didn’t seem very promising.

But fast forward a few years and Tesla Model 3s were dominating the US luxury saloon market, outselling all their European and American rivals. A Tesla ‘gigafactory’ was being built in China, with another planned in Europe. Then in July this year, the unthinkable: Tesla overtook Toyota to become the most valuable motor manufacturer in the world.

In absolute numbers, Tesla’s sales are still low and the company remains barely profitable. Yet no one can doubt the threat that Tesla pose to the established manufacturers. Recent announcements on their ‘Battery Day‘ suggest the company has plenty more technical innovations up its sleeve. And Tesla looks set to deliver a cheaper, higher volume electric car within the next few years.

How Manufacturers Responded

One word sums up how most of the large manufacturers responded to all this change: complacency.

Most seem to have banked on hybrids being sufficient, adding significant numbers to their new ranges. By contrast, their purely electric vehicles have usually been timid toe-in-the-water efforts, niche offerings that lack any real commitment. The Honda e typifies the response. Yes, a real cutie of a car, but with an eye-watering price-tag and disappointing range, it’s far from a serious attempt to take electric vehicles mainstream.

Only one major company has really committed itself to a future beyond ICE: The Volkswagen Group. The German giant has gone all-in on electric cars. It’s a jaw-dropping investment. From 2020 to 2024, VW plans to spend €60 billion on its electric transition, building electric cars on three continents. Over the next ten years, they plan to put 22 million electric models on the road, representing 70 different models.

That transition is well under way. In June last year, the major plant at Zwickau produced its last ICE vehicle, ending a 116 year history. VW will spend around €1.2 billion retooling the plant.

A Colossal Gamble

So, VW has thrown its full weight behind electric cars. While their rivals have been playing let’s-wait-and-see, VW boldly redesigned its vehicles from the ground up, developing a new MEB  platform that can be deployed across its various marques.

Have they read the tea leaves right? Are millions of consumers ready to swap their hydrocarbons for electrons? Because if VW have got this wrong, it will take something extraordinary to turn their ship around.

What VW really needs, right now, is their proof of business plan: a game-changing, mass-production electric car that people love. Something that you can pick the kids up in, or use to take your old fridge to the tip. Something that you can easily park at Tesco, but feels quite sprightly on a country B road. Something that has a decent range, all the latest tech features and a reasonable price.

Something like…the ID.3? Perhaps. That’s the multi-billion euro question, and it’s what Part Two of this post will be all about. Tune in soon.

The WVS blog covers a wide range of automotive topics, from the contentious to the light-hearted. We are an independent garage specialising in all the VW group marques, including Audi, Volkswagen, Skoda and SEAT. WVS provide services, repairs and MOTs, delivering a main dealer level of care at affordable prices. To book your vehicle in, or for any enquiries, get in touch.