Interview with Skoda CEO Klaus Zellmer about MEB+, batteries & the future of electromobility

Yes, that's up to you. You came to Mladá Boleslav. We always find an hour. So let's use this hour meaningfully and go through a few questions about e-mobility and Skoda.

I also have electricity in my heart. At Skoda we have everything, from an Enyaq here with the Elroq to a Kodiaq diesel, which roughly corresponds to market demand. You already mentioned to me, 'Man, the combustion engine still has a future' – that doesn't go down well with my target audience. I understand that, of course. If you're a die-hard battery-electric fan, you naturally want everyone to drive that. The fact is, not everyone drives it and not everyone wants to. That means our job is to offer the right cars, make a business case out of it, and be future-proof overall. Skoda turns 130 next year, so we have a responsibility. That's why I have gasoline in my blood, I enjoy driving electric just as much, but my job is not to do what I want, but what the customers want. So gasoline in the blood but electricity in the heart.

First and foremost, of course, are the costs that consumers have to pay for purchasing a vehicle and then for operating it, but also for charging the vehicle with the corresponding charging infrastructure. These are all prerequisites needed to push through such a big change in society. And change always means uncertainty first. You tell someone they have to significantly change their driving, charging, and mobility behavior – that creates uncertainty. As manufacturers, we have to deliver the products on one hand, and on the other hand provide examples that it's not so bad. It's a behavioral change, but it doesn't mean it gets worse; sometimes it becomes more pleasant, relaxed, and better. But you can't decree that.

Yes, and I'm here in the Czech Republic. We have a lot of catching up to do regarding charging infrastructure. Many are not satisfied. On long distances with high-power charging, we have far too high prices. Sometimes it's more expensive to drive electric than gasoline. With the Elroq, we have a car that, adjusted for equipment, costs the same as its sibling in the group at Skoda, the Karoq. We'll talk about that later. It was important for us to send a signal: the entry price is comparable. And one of my favorite sayings in my automotive career is that people always buy a car for the most unlikely case of use – like the IKEA cabinet from five years ago that has to fit in. That's why range anxiety is rationally incomprehensible. Someone who drives more than 1000 km twice a year worries too much. You can manage that. But many buy the car for that unlikely case. This transformation will gain momentum the more vehicles we offer. That's our job as manufacturers, but there are many other market participants who have to join in.

Absolutely. These are tasks we have to tackle. On one hand, as you said, there are completely vertically integrated processes at BYD, from mine to battery system. We start with the battery cell that we have installed in the battery system here – by the way, a million times now. We are at the forefront. We do it for the whole group, high quality, very cost-effective. But we haven't exhausted the cost potential yet; we're working on it. Our next step is to build our own battery cells in mass production. There's a plant in Salzgitter, a plant in Canada, we're going deeper into vertical integration. But the biggest lever is indeed battery costs. We hear that battery costs in China are under 70 euros per kilowatt-hour in vehicles. We simply can't get there at the moment. I'm not revealing a secret: the Elroq costs the customer as much as a Karoq, but I can say that the profit contribution of the Elroq is significantly lower than that of the Karoq. So we are putting money into it and have to keep working.

You don't know what's coming, especially looking forward. Of course, it's a rolling process. Skoda is characterized by very high cost efficiency, not only in production but also in development. And of course we are working to bring more content – manufacturing but especially development content – to Skoda in the future. But you have to build up the competence first. I'll say it clearly: we have very high body competence, as you can see with the Enyaq. Platform competence we still have to build up. The complete platform can only be done by the group at the moment – that's VW. The MEB platform didn't go to Spain; the MEB platform is still under the group's control because they scale it, and we don't want to give up those scale effects. Looking forward, when we eventually move to the SSP, we'll see; the cards might be reshuffled. But we are already very proud that we are so successful with the Enyaq in the group compared to the competition. In Germany in September, October, and November, it was the best-selling vehicle ahead of Tesla and everyone else. That shows we've put something good out there. And the battery system assembly is something we can be proud of, and we're building on that, definitely.

It depends on the framework conditions. With the Karoq, we have much higher market coverage. We sell about 120,000 to 125,000 units of the Karoq this year. We still have to get there with the Elroq. So keep your fingers crossed, help us. We have a great car. You emphasized that the price is always put forward. The price is set first. Between price and cost is profit. And I have to say, our CFO, Holger Peters, is not happy about the profit contribution of this vehicle. But we are doing it to further accelerate the transformation from the Enyaq with the Elroq, also because we need to achieve CO2 compliance in 2025, where we simply need the units. So there will be a fight for every customer, I'm sure. It's going to get really tough among manufacturers.

It's in the works. We announced it when we announced six new battery-electric vehicles that we wanted to bring by 2026. That has shifted a bit – to put it in our terms, others would say we pushed it back. Among other things, it's the so-called Skoda estate, the Octavia estate. There are several challenges. For the estate, you first need a flat platform to have the corresponding body and to leverage the advantages of an Octavia estate, namely aerodynamics and so on. We don't have that yet. It doesn't work on the MEB; it's too high. That's why we're going to the SSP. The SSP will take a bit more time to get it right, and we're also giving the MEB platform a plus – the MEB Plus. That's not a secret mystery; it's coming. It will be a technological hub for all of us and for customers. So we're taking more time, and with the SSP, an Octavia will come. The MEB Plus comes before the SSP.

Well, in the group it has already been announced that there will be a vehicle under 20,000 euros. VW is leading development there; they are really stepping on the gas. Now we'll wait and see what comes from our group sister brand Volkswagen. The biggest challenge to make money in battery-electric vehicles is in this entry-level segment – the famous segment under 20,000 euros. Because the material unit costs are usually already close to 20,000, and then you need a margin, VAT, dealer margin – it's difficult. And I'm not saying 20,000 euros; they have to be significantly lower. But the challenge: the smaller the vehicle, the lower the margins anyway for all drive types, and for battery-electric it's especially challenging to get a decent battery in, especially when they are still too expensive.

Yes, we are focusing on that. But we don't have all the cards in our own hands. Infrastructure, electricity prices, the overall sentiment in the media and among consumers – we can influence a bit, but at the end of the day, someone else plays those cards. We have to accept that. But I'll tell you, the future is electric – I'm fully convinced because of efficiency. But let me give a technical example. The Octavia today – at Skoda we have been market leader in Europe with the estate since 2016. We sell by far the most. A high proportion are fleet customers, well over 50%. They drive an average of 30,000 to 40,000 km per year. With that annual mileage, many worry that with an electric car they spend too much time charging versus refueling. That's understandable. And now to your topic of combustion engines. Of course, the energy density of fossil fuel, synthetic fuel, or biofuel is much higher than what you can ever get into a battery. If I look at China with range extenders, they have vehicles with over 2000 km range. I always advocate technology openness, even though many say that's a Fata Morgana from people who have long had nothing to decide. I find that interesting. If I have the possibility to run a combustion engine CO2-neutrally, and it gives me higher efficiency due to higher energy density than a large battery of 90, 100, 110 kWh that I carry around all the time but maybe don't always need, and I can use the range extender to do what customers need for their daily long distances, then we have to think that path through to the end.

That's not what I understand by technology openness and this absurd demand that the combustion engine lives forever because you can still make it super efficient. For the existing fleet, I'm with you. We have to decarbonize the existing fleet; we can't replace it all at once. But it will reduce. And yes, regenerative energy that we otherwise don't use – wind, PV – if it's surplus, put it into e-fuels or hydrogen. For that we would need... we've made a huge arc. That's really a completely separate topic and a world of its own.

We can certainly look at it and exchange. What typically happens is we cut a so-called project strip list. Every topic you addressed gets a title, a project, a responsible person, and a timeline. And there's a traffic light at the end – are we within the timeline, can we make it, or not? Now everyone can always say it's all too slow. And yes, we have a multi-layered business model where we have to do many things at the same time. We can't concentrate on just one thing. But what we definitely do: your presentation – I wrote in between, 'Matthias Speicher is no longer there, but he is somehow there all the time.' That's something we take to heart. But as it sometimes is, it's a bit like losing weight. You can say I have to lose 10 kg, but that doesn't happen overnight. You have to do it in a way that you still feel good, no yo-yo effect, and so on. So rest assured, and I can show you that list sometime. I'll tell you where exactly your journey that you presented to us is recorded. It's sliced up, with project definitions, responsibilities, and timelines. And it would be really stupid not to take such relatively good concrete hints to heart. That would be a waste of time, and we have too little of that anyway.

The problem is not so much the software per se; the problem is the interaction of software and hardware. We have conditions in the cars we sold, where hardware is installed that has its limits in terms of processor performance. And we cannot change those limits without completely tearing the car apart and putting in new processors or ECUs. So we are at a technical level that we have to respect first. We optimize as much as possible, but the limit is defined by the IT infrastructure installed. There are three or four topics that come up again and again: preheating, charging provider filters – especially because of roaming usury, so I can say I'd rather charge here and there – consideration of elevation profile. The second generation has all that; it does it great. But the first generation suffers from it. Those are wishes that customers would simply like to hear something about.

I'll put it this way: I compare it – and you like to compare it too – with an iPhone or Android, where the update works. By the way, I just did my 18.1 update, and since then the battery gets so hot that I can't hold it in my pocket. So there are issues there too. But honestly, it's unsatisfactory. And I'm not saying that as an excuse; I'm just saying it's not as simple as one sometimes imagines. Even with devices like a phone, it can sometimes not work. And if it doesn't work, I'm not a danger to the public. But if we play an update onto a car and some interaction with many electronic components then doesn't work, we have a high responsibility. That's why we make it perhaps much harder than it needs to be. We are much more risk-averse than some would like. That's why we are so cautious with software updates; we only roll them out when they have a maturity level that we set as our own goal.

Clearly, because you just said it. The software exists. It's much easier to put new software on a car that hasn't been flashed than on a vehicle that already has a complete software installed, to delete it in quotes and reinstall it. That's a technical difference compared to a car in production, where you first fill it with software and then go live. So that's a difference.

Yes, there are many things we do better than the competition. We have to catch up on other topics. And with software competence in updates, we are working on it. I'm not making excuses for anyone; we are not always satisfied with ourselves, knowing that we have made a big step forward. You say yourself in your videos – I watch them – that 4.0, 4.1 is already a maturity level where we have really made good progress. Now many who drive vehicles of the previous generation say they would like that too. But then there is the technical limit I described. It would be nice for the value retention and long-term usability of the vehicle if you get updates.

Good, we have to catch up on communication. First of all, yes, Cariad – we took on an enormous amount with the goal of creating a unified software architecture for the entire group. I have great respect for the Cariad colleagues. They have improved massively; they have really grown into many processes. If I look at the latest software releases, they have done a super job. As a manufacturer, I can say that this uncertainty can exist, but who would be stupid enough to just cut off a software that was built by Cariad? If we were to turn it off overnight, first legally difficult, second – I would say shitstorm – I wouldn't want that. So I can give everyone the assurance: Cariad had a difficult start, Cariad has massively optimized, Cariad will continue to deliver the performance it shows today with the latest software variants – it's already really good. The next quantum leap – we are getting some outside help from China and with Rivian. But Cariad will always play a role overall, and we have a great interest in our customers continuing to be mobile with our vehicles and the respective software.

A well-available, functioning, affordable charging infrastructure from outside, and vehicle battery prices that allow us on one hand to achieve price parity with combustion engines, but also the same margins we have today with combustion engines to be future-proof.

Oh, I've never thought about that. Ordering a video from you? Well, I saw your vacation video; I thought that was pretty cool. Okay, maybe a video with only positive messages – everything that is really good, without any deep dives into what we can do better. We need that too – a video where everything is positive.

Yes, first of all, thank you for being here today. Thank you for reporting about Skoda really neutrally. We also always have energy in the room when we talk, but that's how things get better. And thank you for the loyalty – opening up to the topic of Skoda and staying true to us. That honors us, that drives us. And I promise that we will do everything to always have happy customers.