Volkswagen Is Going to Start Making Electric Cars in the U.S.

December 1, 2017, 10:58 AM UTC

Volkswagen (VLKAY) will likely start making electric vehicles in the U.S. by 2023, according to plan unveiled Thursday.

Herbert Diess, head of the VW brand, told a press conference Thursday that although the company hadn’t yet taken a formal decision, “Chattanooga is our first choice” for making EVs destined for the North American market.

Chattanooga is home to VW’s only U.S. plant and has been earmarked for a wholesale expansion since the company’s diesel emissions scandal erupted in 2015.

Read: VW Has an $82 Billion Plan to Be a Leader in Electric Cars

Last month, Volkswagen’s board approved plans to invest some 34 billion euros ($41 billion) over the next five years in electric mobility and autonomous driving capabilities, with the intention of being the world’s biggest electric carmaker by 2025. The group, which also owns the Audi, Porsche, Bentley and Skoda brands, aims to be making 1 million electric cars a year by 2025.

VW’s shares have been on a tear this year due to rocketing growth in China and the growing confidence that the company has put the worst of Dieselgate behind it (even if related charges still wiped out its operating profit in the first three quarters of this year, and further charges from civil actions in Europe seem likely).

In November, its stock climbed above the pre-Dieselgate level for the first time. Central to that performance is improving profitability at the VW brand. On Thursday, Diess said the brand’s operating margin would rise to between 4% and 5% in the medium-term, more than double what it has been in recent years, and a nudge up from its previous target of 4%.

Read: Volkswagen Executive Pleads Guilty in Diesel Emissions Scandal

In part, that’s due to cost cuts that the company has only been able to push through since the Dieselgate scandal. It has shed 3,800 jobs this year and aims to lose 23,000 by natural attrition by 2020. But it’s also been helped by a rising proportion of higher-margin vehicles such as the Atlas SUV. Dies said the company will also bring a redesigned Touareg and an all-new T-Cross to market next year.

“With SUVs, we are earning the money we need to fund the shift towards electric mobility,” Diess said, although he cautioned: “We have completed the first five kilometers of a marathon. We are all aware of the challenges that lie ahead of us.”

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