Volkswagen will shift focus towards electric vehicles to shake off the emission-cheating scandal

Electric cars at heart of Volkswagen transformation

German car-maker Volkswagen plans to turn away from diesel engines and focus instead on electric vehicles in order to restore its corporate reputation,  damaged by the emission cheating scandal.

According to Matthias Mueller, the VW Group’s CEO, the car-maker aims to introduce 20 new electric models by 2020 and also focus on consumer car-sharing services.

Previously, diesel technology has been at the heart of Volkswagen’s development strategy, but sales have suffered after it was revealed the firm had been cheating in nitrogen emission tests.

Volkswagen outlined its plans on the same day that the German government announced a new incentive scheme designed to encourage the uptake of electric vehicles.

The scheme will offer €1bn (£0.78bn) to help consumers buy more electric vehicles with the goal of having one million of them on the roads by 2020. The German government will fund the scheme together with the country’s car-makers, Germany’s Transport Minister Alexander Dobrindt said.

Germany, one of Europe’s biggest car markets, currently only has about 50,000 battery-powered and hybrid cars on its roads. In total, 45 million cars are currently registered in Germany. The government hopes the scheme would help car-makers to sell an additional 400,000 electric cars.

The German government agreed with car-makers including Volkswagen, BMW and Daimler that car buyers will get a €4,000 discount when buying an electric plug-in vehicle and €3,000 when buying a hybrid. Only cars selling for less than €60,000 will be eligible.

"With this, I believe we will be able to give a boost to quickly move the number of vehicles [sales] to a considerable level," said Finance Minister Wolfgang Schaeuble.

The programme includes €300m of spending on charging stations and could start as early as May, Schaeuble said, adding that the government was considering further steps like tax incentives to make electric cars even more attractive.

While the industry has been calling for the government for years to give electric cars a boost, critics say the increased electricity demand will lead to higher carbon emissions.

The idea of subsidising private car sales was also criticised by some politicians who said money should instead be spent on electrification of taxis, public transportation and car-sharing fleets.

Electric car subsidies already exist in many European countries including the UK, Norway, the Netherlands and France.

"In countries where the government is providing an impetus, electric mobility is growing more quickly," Matthias Wissmann, head of Germany's VDA auto industry lobby said.

Volkswagen, which has incurred losses of €5.5bn in the wake of the emissions scandal, said despite the change of direction, fixing vehicles fitted with the defeat device was still a number one priority. The software was used to turn on emission scrubbing systems in cars only for the time of testing as the technologies were known to increase fuel consumption in real driving conditions.

Volkswagen also said it will soon form a legally independent company to promote business in mobility services, which could include travel options like ride-sharing apps and car-sharing.

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