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Wall Street Journal / Tech - Game

Volkswagen’s Namesake Brand to Build Electric Cars in U.S.

Volkswagen’s VW brand will build one or two electric vehicles in the U.S. by 2023, probably at its Chattanooga, Tenn. factory, as tougher emissions rules drive the auto industry toward mass production of battery powered cars.

By

William Boston

WOLFSBURG, Germany—Volkswagen AG’s VW brand announced plans Thursday to build one or two electric vehicles in the U.S. by 2023, probably at its Chattanooga, Tenn. factory, as tougher emissions rules drive the global auto industry toward mass production of battery powered cars.

The first models in the company’s new electric car series, currently dubbed I.D., are expected to be launched in 2020 and will first be built at the company’s factory in Zwickau in eastern Germany. Volkswagen is also investing around $12 billion to build electric vehicles in China.

The VW brand, the biggest of Volkswagen’s 12 brands that include Audi , Porsche, Bentley and Lamborghini, expects to sell about 100,000 electric vehicles world-wide in 2020 and one million electric vehicles by 2025.

Much of that demand growth will be driven by China, said Herbert Diess, VW brand chief executive.

“The electric vehicle is also going to be an option in the U.S.,” Mr. Diess told reporters at the company’s headquarters in Wolfsburg, Germany. “We haven’t taken a formal decision yet, but Chattanooga is our first choice.”

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Mr. Diess provided no other details about its U.S. electric car plans, saying only that production would begin in 2022 or 2023.

Volkswagen’s only U.S. factory is located in Chattanooga, where it produces its popular Atlas 7-seater sport-utility vehicle. One of the largest of Volkswagen’s more than 100 factories world-wide is located in Puebla, Mexico. Cars produced at the plant are exported to the U.S. and around the world.

There could be political reasons to produce the electric models in Chattanooga, in light of pressure on foreign manufacturers from President Trump to stop making cars in Mexico or face heavy import taxes. But Chattanooga is also still operating below capacity, despite a strong revival of Volkswagen’s U.S. sales two years after the diesel emissions cheating scandal.

So far in 2017, sales of VW-brand vehicles are up 9.4% after rising in 11 of the past 12 months. In October, VW brand car sales rose 12% to 27,732 vehicles, bucking the broader downward trend in U.S. new car sales.

VW brand sales came to a standstill in the U.S. in the wake of the disclosure by U.S. authorities in 2015 that the company had rigged diesel-powered cars to cheat emissions tests. The company pleaded guilty to violating U.S. law in 2016 and has so far paid more than $25 billion in penalties, fines, legal fees and compensation for customers and dealers.

The VW brand has taken the brunt of the company’s diesel emissions cheating scandal, and is still struggling with the costs. Additional diesel-related charges in the third quarter of 2017 erased the division’s profit from operations in the first nine months of the year. Earnings before the diesel-related charges in the period doubled to 2.5 billion euros ($3 billion), achieving a profit margin of 4.3% and surpassing its 2020 target. As a result, the VW brand lifted its profit target for 2020 to 4% to 5% of sales.

Corrections & Amplifications
In October, VW brand car sales rose 12% to 27,732 vehicles. An earlier version of this article omitted the time reference.

Write to William Boston at william.boston@wsj.com

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