Volkswagen's Electric Effort Charges Up Detractors

By Mike Spector Features Dow Jones Newswires

Several state officials and auto makers are pillorying Volkswagen AG's plan to sell battery juice to Americans driving electric cars, contending the project more resembles an unfair government-backed windfall than penance for cheating on emissions tests.

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The German auto giant will build an extensive network of charging stations in the U.S. in coming years, part of a $2 billion, decade-long promotion of environmentally friendly transportation in a market where electric cars are unpopular. The commitment is part of a broader settlement with government officials and consumers after Volkswagen admitted to installing illegal software on nearly 600,000 diesel-powered vehicles in the U.S. that duped emissions tests.

Seven Republican and Democratic state attorneys general have appealed to the Environmental Protection Agency, arguing Volkswagen's plan could give it an unfair leg up on other car companies. Volkswagen says its chargers will only meet a fraction of the projected need for drivers of electric vehicles, and that it isn't blocking other companies from pursuing competing plans.

Its investment into the charging stations is separate from other significant financial penalties the auto maker agreed to in the emissions case. Volkswagen views the plan as consistent with its effort to transform the company to one investing in electric vehicles instead of diesel technology.

With an initial $300 million investment outside California, Volkswagen plans to create more than 450 charging stations in 39 states both along highways and at workplaces, retail centers and other sites. The company aims to sell a million electric vehicles globally by 2025. Other auto makers are also making ambitious investments in electric cars.

The attorneys general wrote to the EPA's chief in April, after the agency approved Volkswagen's initial plans. Other auto makers sent letters to California environmental regulators expressing similar concerns.

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The EPA had no immediate comment. The California Air Resources Board in late May wrote to Volkswagen asking it to address competition concerns, plans to install charging stations in poorer communities and the potential for fuel depots servicing hydrogen fuel-cell vehicles. Some auto makers seized on Volkswagen's lack of plans for that technology.

A Ford executive focused on Volkswagen's plan to install 50 ultra-fast charging stations in highway corridors and raised concerns that the German auto maker could design them without regard to other car companies' needs while also having access to competitors' customer data.

"Given the importance of this portion of the infrastructure to [battery-electric vehicle] adoption, Ford has reservations about having a key electrification driver dependent on and ultimately controlled by one automotive competitor," wrote John Viera, the Dearborn, Mich., auto maker's global director of sustainability and vehicle environmental matters, in a letter to California regulators.

Rather than a punishment or government-endorsed competitive foothold, Volkswagen views the investment as a good-faith showing after agreeing to pay billions of dollars to owners, dealers and regulators.

"There is a lot of investment that needs to happen. We're just part of it," said Mark McNabb, chief executive of Electrify America LLC, the German auto maker's subsidiary undertaking the investment plan, in an interview.

Volkswagen's stations ultimately will address less than 10% of charging needs, Mr. McNabb said. "I don't think we're a dominant part of the equation."

Tesla Inc. currently has an extensive charging network, featuring 861 stations with 5,655 speedy chargers for drivers of its expensive electric vehicles. Tesla has chargers around the world and in most U.S. states. Volkswagen's success with its chargers isn't guaranteed in an era of cheap gasoline that lowers demand for electric cars, though forecasters expect their popularity to rise.

In the U.S., electric vehicles are expected to eventually make up 6% of overall car sales over the next two decades or so, up from less than 1% currently, according to the Energy Information Administration. By 2025, sales of battery-powered electric vehicles, plug-in hybrids and hydrogen fuel-cell cars together will reach 1.5 million, or about 9% of U.S. sales, the agency projects.

Volkswagen plans to reap revenue from drivers and other auto makers. Motorists are expected to be able to swipe credit cards at charging stations to refuel, or purchase time-limited subscriptions to Electrify America's network. Some auto makers could also pay Electrify America a fixed rate for each vehicle it sells and then offer its customers free charging on the burgeoning network. The exact prices aren't yet clear, but will be based on the type of charger, kilowatt rates and market conditions, a company spokeswoman said.

The company's push comes on the heels of its diesel-emissions cheating crisis. Volkswagen pleaded guilty to criminal charges and agreed to legal settlements and penalties that could exceed $25 billion depending on how many vehicles the company repurchases.

"We continue to be concerned that Volkswagen will be allowed to benefit from a settlement intended to penalize for defrauding consumers," said a spokeswoman for Arizona Attorney General Mark Brnovich, a Republican, adding the office expects the EPA to "diligently monitor" Volkswagen's program.

A spokeswoman for Rhode Island Attorney General Peter Kilmartin, a Democrat, said that "concerns remain that [Volkswagen] will gain an advantage in the industry despite the company's past malfeasance."

Messrs. Brnovich and Kilmartin were the lead signatories on the letter to the EPA, which also included attorneys general from Connecticut, Iowa, Nevada, Texas and Wisconsin.

Volkswagen has discussed concerns with other auto makers, Mr. McNabb said. The company is working to "future-proof" its planned charging stations so they remain relevant for years, in part by fitting them mostly with standard plugs that most car companies are using when developing their own electric vehicles, he said.

State attorneys general, however, argue Volkswagen's proposal could allow it to distort and possibly corner parts of the market for zero-emission vehicles. Some represent states that are home to large factories for other auto makers that compete with Volkswagen. Auto makers are also concerned Volkswagen's proposal installs charging stations where there are already lots of electric vehicles.

Write to Mike Spector at mike.spector@wsj.com

(END) Dow Jones Newswires

June 06, 2017 05:44 ET (09:44 GMT)