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Volkswagen CEO warns on energy supply as automaker switches to coal

Yahoo Finance Live anchors discuss Volkswagen CEO's warning on energy supply as the automaker switches to coal.

Video Transcript

BRIAN CHEUNG: All right, switching gears now to the auto world, as shares of German carmaker Volkswagen are moving down this morning, down over 1%. That's after we heard from CEO Herbert Diess, who warned that the shift away from Russian energy isn't happening fast enough and could lead to an energy supply halt.

For more on this, let's bring in Yahoo Finance's auto correspondent-- senior auto correspondent, sorry, Pras Subramanian. You're the only one, of course. Pras, give us a breakdown on exactly what's going on here. We know that Germany, at large, was very reliant on Russian energy, cut off during the invasion of Ukraine. That presents some challenges for, automakers like VW, doesn't it?

PRAS SUBRAMANIAN: Yeah, it means tough times in Germany for everyone, but in particular, these automakers that have power plants that actually power these factories onsite. And they've had to switch from LNG or natural gas to coal, which is kind of a big deal in Germany, like coal power to power these plants. And then talking about how they're not going to get there in terms of energy independence for quite some time, this is as VW was trying to catch Tesla in production, right?

So they say they have a year of back orders for EVs right now, but they're still trying to ramp up to catch them, but they're doing it with the coal powered plant. So it's not all bad news, though, for VW. The CFO said at another event today that the Porsche IPO is on track for the fourth quarter because that company's resilient to market disruptions like component shortages and energy disruptions, things like that.

BRIAN CHEUNG: So I guess this is an interesting narrative for Volkswagen, which got busted for that big emissions scandal because here, you have a company that was essentially one of the first to make the transition to EV because they were required to do so, now turning to coal.


BRIAN CHEUNG: Of course, it's a short-term fix, right? At least--


BRIAN CHEUNG: --that's probably what they're saying.

PRAS SUBRAMANIAN: I mean, how long are we talking about here in terms of the Russian-Ukraine conflict, right? Is it-- can they actually get that nat gas from the US? They want to get that LNG come from the US. That takes time and setting up new lines of transport. So I don't know how long that'll take. But it's funny that a green Germany using coal to power their plants to make EVs is sort of out of whack, right?

BRIAN CHEUNG: So then what do you think the CEO is trying to say here? Who is he talking to? Is he trying to talk to German policymakers to say the infrastructure needs to be built up at a national level with other types of energy suppliers? Or is it-- is he talking to himself and saying Volkswagen needs to do their own transition faster? Who's the audience here?

PRAS SUBRAMANIAN: You know, it's funny you mention it because just a couple of days ago, the Germany's EU representative basically said that they're not going to abide by the 2035 deadline to get all cars to be EVs. They said we're not going to do that. We can't meet that sort of obligation.

And the fact that they're a massive automaker in terms of Germany, the actual industry is so hugely tied to the auto industry that they can't just say, we're going to go all EVs right away, you know? So I think it's both in conversation with the actual country and people there and just delegates in general. Like, hey, let's try to make this happen in a way, like, sustainable way.

BRIAN CHEUNG: To be clear, does any of this have any impact on the output and development that they have right now in terms of the expansive line of EVs that they want to--

PRAS SUBRAMANIAN: It seems like in the next two to three years, they've actually kind of lined up all the materials they need, the battery supplies, the product lines and factory lines to make these cars for the next couple of years. After that is when we're going to question, can they keep making that in that quantity that they say they will through 2030?

BRIAN CHEUNG: OK, Yahoo Finance's Pras Subramanian, thanks so much for the breakdown. Appreciate it.