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Volkswagen is making a huge shift to electric cars in the wake of its diesel scandal

Volkswagen Holds Annual Press Conference
New passenger cars of German automaker Volkswagen AG await their new owners in one of the twin car towers at the Volkswagen factory on day of the company's annual press conference on April 28, 2016, in Wolfsburg, Germany.
(Sean Gallup/Getty Images)

Volkswagen has been in deep trouble this past year. Last fall, the German automaker was caught rigging more than 11 million of its "clean diesel" cars in the US and Europe so they polluted far less during testing than they did on the road. The scandal could ultimately cost the company $18 billion in recalls, repairs, and fines.

So now VW is engaged in an image makeover. On Thursday, the company announced that it would go all-in on the electric vehicle craze that’s starting to sweep the globe. At a press conference, CEO Matthias Mueller said Volkswagen would introduce 30 plug-in electric vehicle models by 2025. It aims to sell between 2 and 3 million electric vehicles per year.

That’s a massive ramp-up. To put that in perspective, there were only 1.3 million electric vehicles on the world’s roads, total, in 2015. But places like China, the United States, and Europe are making a big policy push to promote EVs — which can be much greener than conventional combustion engines, so long as they’re powered by low-carbon grids. And falling battery prices are expected to spur widespread adoption.

Volkswagen also said it will develop its own "competitive self-driving system" and offer it to other companies before the end of the decade. The entire plan, known as Strategy 2025, could entail billions in new investments. Mueller called it the "biggest transformation in the company’s history."

The push for diesel was a fiasco in Europe — so now countries are promoting electric vehicles

An increasingly common sight.

Once upon a time, diesel vehicles were seen as the next big "green" thing. As I detailed here, back in the 1980s and 1990s, European countries put in place a number of policies to promote diesel cars — which have more efficient engines than conventional gasoline-powered vehicles — in the hopes of reducing overall carbon dioxide emissions. By 2011, nearly 60 percent of new cars sold in Europe ran on diesel.

But thanks to the way their engines worked, diesel vehicles came with a major trade-off: They produced more conventional air pollutants like soot, particulates, and nitrogen oxides (NOx). Heavy exposure to these pollutants can exacerbate heart and lung disease, trigger asthma attacks, and even cause premature death.

Initially, Europe allowed diesel cars to meet less-strict pollution standards in order to encourage the technology. The hope was that regulators could ratchet up these standards later on. But this ended up backfiring: Thanks to lax testing procedures, most diesel cars polluted far, far more than the newer, stricter regulations allowed. Volkswagen was the most flagrant cheater, but many other diesel car models used perfectly legal methods to skirt past pollution testing. Many of Europe’s cities remain choked in air pollution as a result.

At this point, many European policymakers have realized that the push for diesel vehicles was a fiasco, and a number of countries are instead starting to promote electric vehicles as a way to reduce both conventional air pollution and carbon dioxide. Countries like France, Britain, Netherlands, Spain, and France all have significant incentives for electric vehicles, which now make up some 1 percent of the car fleets in a few countries.

(IEA, Global EV Outlook 2016)

There’s less consensus, however, on what kinds of electric vehicles will prevail. Companies like Volkswagen in Europe and Tesla in the United States are betting on plug-in battery vehicles — you charge them up in your outlet at home and the battery powers the car. GM, by contrast, has had success with plug-in hybrid vehicles like the Chevy Volt, which have both batteries and a backup gasoline engine for extended range.

By contrast, Toyota is betting on hydrogen fuel-cell vehicles that use hydrogen to produce electricity. (These get longer ranges than plug-in vehicles, but they would require an elaborate new hydrogen fuel infrastructure to be built.) And Nissan is betting on a strange ethanol fuel-cell vehicle that would use existing biofuels to generate electricity in their cars.

We’ll see what technology ultimately prevails. A number of companies are also working on various self-driving features that could dramatically shape what the car of the future looks like. But bottom line: There’s a lot of innovation in this sector, and now Volkswagen is throwing its know-how into the ring, hoping to recover from its disastrous foray into diesel engines and flagrant law-breaking.

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