C&B Notes

K Car = Skateboard Chassis?

In the late ‘70’s and early ‘80’s, Lee Iacocca bet big on the K car concept, which is credited as being one of the (if not the) primary reasons for Chrysler’s resurgence.  Competitive dynamics in the car business have changed, but VW’s pursuit of its “skateboard chassis” is reminiscent of Iacocca’s strategic decision.

But its proposed killer is not an electric car.  It is the underlying chassis or platform, called MEB — the basic building block for 50 different models VW promises by 2025.  Some investors and analysts think the VW chassis, which will be used for the majority of its electric vehicles, may give the German company a vital edge in the new era of battery-powered cars.  “This platform is the heart and soul of everything Volkswagen is doing in the future for passenger cars,” said Johannes Buchmann, manager at FEV Consulting, an advisory group that focuses on cars.  “It’s not just a design principle, a template for their new cars.  It has an impact on the whole organisation, supply chain and manufacturing quality — pretty much everything.”  Of all the traditional car groups, VW is taking the boldest gamble by spending €30bn on electric cars in the next five years alone.  The crux of the investment is MEB, a “skateboard chassis” designed solely for electric vehicles, rather than a combustion engine platform modified to fit batteries.

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The company’s ambitions for its electric platform, however, are even greater.  It hopes this chassis will become the industry standard in the way VHS once was for videotapes, according to two people familiar with the plan.  The company is in talks over supplying the chassis with multiple carmakers. One is Ford, which confirmed this when it announced its “global alliance” with VW at the Detroit car show this month.  For now, this partnership is centred on light commercial vehicles.  But analysts at Barclays said it is “obvious” and would offer “substantial benefits” if the partnership extended to Ford building electric cars on VW’s chassis.  This potentially represents a mould-breaking move as, until this decade, car producers sought to distinguish themselves from their rivals by developing their own powertrains, which comprises the engine, transmission and driveshafts of a vehicle.  But in the emerging era of electric, internet-connected cars, batteries are expected to be commodified — the way they are for mobile phones — with the motorist likely to be more interested in a car’s electronic and infotainment features than its horsepower.“  If you don’t have to spend so much money on architecture [the chassis], you could refocus your efforts on electronics, user experiences, and autonomous systems,” said Chris Borroni-Bird, a former GM and Waymo executive.

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Eight factories on three continents are scheduled to use the platform by 2022.  The 12-brand group sold a paltry 40,000 electric cars in 2018, but by 2025 it aims to be selling as many as 3m — a quarter of its projected global production. The vehicles built on the electric chassis are also expected to be profitable by 2021 at the latest.  One person familiar with the strategy said VW has cut the number of hours needed to build cars on the platform dramatically, achieving savings of 35 per cent in production costs.  This person said VW’s combustion-engine cars take between 26 and 32 hours to build, but a vehicle built on the electric chassis needs only 16 hours. The goal is to reduce this further to just 10 hours within a few years. That would enable VW to launch a low-end electric model as early as 2023, costing just €18,000 — one-third of the €55,000 starting price for a Tesla Model 3 in Germany today.

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