VW Chattanooga an option for electric vehicles, official says

Volkswagen is "all in" when it comes to electric vehicles, an auto analyst said Thursday as the carmaker eyes its Chattanooga plant as a production site option.

"Volkswagen is making a big commitment," Michelle Krebs of Autotrader said about the German car company's plans to spend billions of dollars worldwide to assemble a wide range of battery-powered vehicles.

Volkswagen Group of America's new chief executive said Wednesday at the Los Angeles Auto Show that the automaker is scouting sites in North America for electric vehicle production.

"We are 100 percent deep in the process of 'We will need an electric car plant in North America,' and we're holding those conversations now," NPR reported CEO Scott Keogh saying at the auto show.

Keogh said VW's Chattanooga plant is an option because there's enough room for extra assembly at the factory that makes the Passat sedan, the seven-seat Atlas sport utility vehicle and, soon, a five-seat version of the SUV.

The German company is planning to offer a $30,000 to $40,000 electric vehicle in 2020, Keogh said. The new car initially will be sourced outside the U.S. before production begins in North America, he said.

Antonio Pinto, CEO of VW's Chattanooga plant, said earlier this year that electric vehicle production could begin there with new equipment and "some optimization" of space.

"That's all," he said. "We would like to have electric vehicles here. There's an opportunity for much more employment." The plant now employs about 3,500, and Pinto has said a third shift could be added next year and boost the worker headcount further.

Also, Volkswagen has an option on hundreds of acres next to the existing Enterprise South industrial park plant to physically expand, should company officials decide to make the investment.

Krebs said she doesn't think VW needs another plant because it's not selling that many vehicles in the United States. Through October, Volkswagen of America sales are up 5 percent to 295,228 vehicles.

But when it comes to electric vehicle sales and production, there are a lot of moving parts, Krebs said.

"Will the federal government levy tariffs on vehicles from Europe?" she asked. While VW is making electric vehicles in Europe, selling them in the U.S. doesn't work if there's a 25 percent tariff on imports, Krebs said.

Also, she said, much depends on which vehicles VW intends to make battery powered.

In addition, Krebs said, no car company is now making money on electric vehicle sales. VW and other car companies will try to produce the vehicles in a cost-efficient way and place, she said.

Also, there are questions related to tax credits that the federal government provides to buyers of electric vehicles, the analyst said.

The EV Drive Coalition, based in Washington, D.C., reports that the $7,500 electric vehicle tax credit passed by Congress in 2008 to boost the market is "a significant purchase factor for car buyers and is essential to the continued development of the EV market."

The credit is considered "a true benefit because it goes directly to consumers, not car manufacturers or other companies," according to the coalition.

Trevor Francis of the coalition added that there's a cap on the number of consumers who can use the tax credit based on which manufacturer made the car. The cap is 200,000 units in cumulative sales since 2008 per automaker, he said. After that number is reached, there's a reduced credit for "a short time" until it reaches zero, Francis said.

He said Tesla has already hit the 200,000 mark and General Motors is closing in on it.

"The U.S. EV market is at a critical crossroads as manufacturers begin to hit that cap," Francis said. "The EV tax credit should be reformed so all EV purchasers continue to receive the benefit of EV tax credits."

But Krebs said that electric vehicles now make up little of the U.S. market, about 1.2 percent of the roughly 17 million cars, SUVs and trucks sold annually.

"Gas prices are low," she added. "That doesn't encourage electric vehicle ownership."

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.