In conversation with Klaus Zellmer

Yeah, well, you know, I mean this is no secret. Sustainability is the name of the game; it's a hygienic factor you can't do without. And any business you build financially successful long term has to factor that in. With us we have a strategy called The Next Level 2030 strategy; one of the nine strategy fields is ESG, or environment, social and governance. And within that we have a lot of action fields. We're not just talking about sustainability; we want to provide proof points along the whole value chain, also incorporating our suppliers and our production facilities. Matter of fact, one of our factories in the Czech Republic is already CO2 neutral, and the rest of our factories, also in India by the way, will be CO2 neutral by the end of this decade. So we're working on it. We have a lot of people that are responsible to drive decarbonization. And then of course when we talk about producing, we also talk about consumers: battery electric vehicles. We have two models in the market from Skoda. We have just announced that we will build another six in the coming years. We're investing 5.6 billion euros into those cars, into the development of those cars. The next car actually joining the family, the green family, this year will be called the Elroq, which is a slightly smaller version of our current car. And then I think the biggest anticipation runs with our entry model battery electric vehicle, which the name is not out yet so I have to be a bit cryptic here. But that car will be around 25,000 euros, and then it's more affordable, and hence it will increase our footprint in this battery electric vehicle market. Hence sustainability is the name of the game.

Yeah, step by step. For us this is an evolution. I always keep reminding ourselves and people outside our company that we're basically renovating a house with everybody still living, cooking, eating, and sleeping in that house. So it is a challenge. And this is why this transformation needs time. And currently if you want to buy a Skoda, the offer is you can go for a mild hybrid, a hybrid, a plug-in hybrid, a diesel, a petrol car, or a battery electric vehicle. So we're doing everything at the same time, which reflects the market. The share of battery electric vehicle sales in Europe was less than 20%, so we're catering for the 80% and the 20%. And this is exactly how we transform our employees as well. We need to get them onboard, support them for new technologies such as battery technology, battery cell development, the electric drivetrain, but also everything digital. We're talking about software-defined vehicles, which is a big challenge for the established industry; this is not our home turf. But we're getting there. But it takes time. As I said, it's like an evolution, not a revolution for us.

Well, you know, if you take a rational point of view for battery electric vehicles, you have instant torque with a car, you have low total cost of ownership, very little maintenance, the cars by definition are technologically more advanced. So that's pro battery electric vehicle. Also, depending on electricity cost, but generally speaking, 100 km in a battery electric vehicle will always be cheaper than in a combustion engine vehicle. So that's good. Now, will it always be cleaner? The well-to-wheel, well we need to work on that. If you have green energy, that's a prerequisite for it to be cleaner than a comparable combustion engine car. But you need renewable energy for that along the whole value chain. I just gave you the example of CO2 neutral production facilities. Let me give you another example: in Mlada Boleslav we have commissioned the biggest photovoltaic roof system in the Czech Republic, generating 2 gigawatt hours of electricity a year. 30% of our electricity need in our factory in Pune, India is generated by photovoltaic system. So every little piece of the value chain you have to attack, and this is what we're doing. Now coming to why consumers might not buy into battery electric vehicles: it's often psychological barriers that we see. Range anxiety, obviously. A battery electric vehicle from a consumer point of view is very different. Different means change, change means uncertainty. So we have to overcome those barriers, often psychological barriers. And this is not just our task; this is also a task of the government, establishing the infrastructure so you feel comfortable when you want to charge outside your home. So it's something where the playground is full of people playing together for fighting climate change.

I would say all of that, of course. And of course suppliers, by definition, often the tier-sized supplier, not the really big five, they're more adaptable, they're more flexible, they're more variable, they're more agile than the big car manufacturers. So I'm not worried about the suppliers at all to buy into sustainability, decarbonization, new technology. Of course it's a challenge for them as well. If you produce combustion engines, that part of your business comes to an end by 2035, so you need to invest into new technology and competences, and they're doing so. Now one of the elements that we as manufacturers need to tackle is to understand the CO2 footprint of each and every screw of a car or each and every part of a car, depending on where it is being produced, how it is being produced, how far away that is. So that is still something that we need to tackle. We're talking about decarbonization, but this is part of what we need to understand for the 200 to 1,000 parts of a car to then really claim it's decarbonized. But we're also working on that and there are some great companies out there helping us navigate through that.

Yeah, I think the 2035 deadline is unquestionable. This is something we need to really address and work for and have our cars as attractive as possible to meet that deadline. Our battery electric vehicles also from a cost point of view which is a challenge because currently combustion engine cars are more profitable than battery electric vehicles, everybody knows that. Now from a policy point of view, we need stability. We need our resources to then focus on transformation. We just had a very interesting discussion about Euro 7. I don't know whether you're aware of that: the initial draft would have asked to invest so many billions into existing combustion engine technology that would obviously then be missing for the transformation into battery electric vehicles. So we need to stay reasonable. I'm a bit worried, I have to say, about the fact that the penalties if you don't meet your CO2 limits rest with the car manufacturers and not so much with the consumer. So this is something to look at. And then the biggest challenge from my point of view will be the existing fleet. Our European car park by the end of this decade or let's say 2035 will be dozens of millions of combustion engine cars. Where do they go? Well, they will stay in the market and they need to be fueled in order to be used. So we're talking about synthetic fuels, e-fuels. This cannot be pushed off the table because it is going to hit us. Once we stop selling combustion engine cars, there will be still dozens of millions around, and we need to find a way to decarbonize those as well. So this is from a policy point of view something that I would like to encourage more thought about, like a Cash for Clunkers program. It's not all about just the subsidies and financial incentives in order to change into battery electric vehicles, because at the end of the day I don't think any government will be able to sustainably pay for that. The ecosystem has to be there for people to embrace battery electric vehicles, and that exercise, coming back to the playground with many players, is upon all of us.

Yeah, I will. Thank you. Thanks for having me. Thank you very much.