FRANKFURT – Volkswagen AG will be a player in the U.S. hybrid-electric vehicle (HEV) market beginning in 2008, with the VW Jetta and Audi Q7 among the first vehicles to be equipped with the fuel-efficient technology, CEO Bernd Pischetsrieder tells Ward's in an interview here.

The German auto maker has developed a hybrid system with the flexibility to mate electric motors to a variety of powertrains and is planning a modest global onslaught.

It will start with hybrid versions of the Jetta and the all-new Audi Q7 cross/utility vehicle in North America in 2008. Porsche AG, a partner in the development, will put the technology into the Cayenne CUV later this decade as well.

On the other side of the world, the system will bow in China, where partner Shanghai Automotive Industry Corp. (SAIC) plans to begin production of a VW Touran HEV. Assembly will begin with 500 units for use at the 2008 Olympic games in Beijing, with large-scale production to ramp up by 2010, according to SAIC. (See related story: VW, SAIC to Make Hybrids in China)

Audi Q7 hybrid

“This powertrain package which we develop for the Touran is the same as the one for the Jetta because the engine compartment is the same,” Pischetsrieder says.

“This unit could be applied in the Passat, in the Golf, in the Jetta, in the Touran, even in (a) Skoda or the SEAT Leon,” he adds.

The inherent flexibility of the system is that it was designed to work with just about everything and in just about anything, including the complete Golf and Passat families.

“The way the technology's developed, it doesn't matter which kind of engine. We can combine the hybrid system with 4-cyl., 6-cyl., 8-cyl., engines, diesel engines, whatever,” Pischetsrieder says.

The technology was developed as a flexible module that allows for sharing of key components, such as the electric motors and electronic controls, but allows for differences in mechanical parts to accommodate vehicles with north/south engine configurations as well as an east/west layout, he explains.

VW officials expect a supply base for hybrids to evolve from the wealth of Tier 1 suppliers in Germany.

ZF Friedrichshafen and Continental AG showed elements of their joint hybrid-technology development program this week at the auto show: a hybrid drive that would fit in the space of a transmission by eliminating the torque converter.

"We're working with a car maker," says Frank Finzel, product manager for ZF's electric motors. (See related story: European Governments Press Auto Makers for Hybrids)

Pischetsrieder confirms the two are VW's parts suppliers for the hybrid system.

Wolfgang Hatz, Audi AG executive director-powertrain development, says key sourcing decisions will be made within the next three to five months for the first production Q7 HEV.

Rupert Stabler, Audi chief financial officer, says one key component that must be sourced elsewhere are batteries, as two Japanese companies dominate that market.

The challenge of producing HEVs is not technical, but financial, Stabler says, particularly if a vehicle or brand lacks premium status to be able to price it high.

“We have a clear commitment from the CEO that in 2008 we have a hybrid. It is up to us to find a resolution,” Stabler says.

Pischetsrieder is not a hybrid convert, acquiescing only to the benefits of the technology in city driving and the fashionable status it currently enjoys in North America.

“On normal distances, hybrid is nonsense,” Pischetsrieder says. He prefers the torque and consistent fuel efficiency of today's diesels and laments the cost of a system that combines two powertrains.

“The market will decide,” Pischetsrieder says. “If the customers' choice is they want a hybrid, you make a hybrid. We need to be flexible.”

Len Hunt, executive vice president-Volkswagen of America Inc. until Oct. 1 when he assumes a new position as head of global sales and marketing for Bentley Motors Ltd., says he has been pressing Germany for hybrids for North America to augment diesels as fuel-efficient alternatives. (See related story: VW, Bentley Executives Switch Duties)

Hunt agrees the low-end torque that diesels provide make them ideal for North American driving, with numerous traffic lights and lane changes.

And he couldn't be happier that the new Jetta and Passat currently are launching at a time when higher gas prices have U.S. buyers “running from SUVs in droves.”

Sales through the first 10 days of September were up 70% over August, Hunt says, attributing it directly to the price at the pump.

Dealers tell Hunt diesel-engined vehicle sales easily could have doubled in the last two months had they had more inventory. In Texas, one in three Jetta sales is equipped with a diesel, Hunt says. And in Canada, where more than 50% of the total sales mix is diesel (vs. 12%-15% penetration in the U.S.), sales of diesel-powered vehicles jumped to 63% in August, he says.

The diesel in the '06 Jetta will be compliant when new Tier II and Bin 5 emissions requirements take effect in 2007, Hunt says. But the '06 Passat does not bow with a diesel – part of its lifecycle management, he says.

The VW Touareg CUV had a diesel for '04 and dropped it for '05. It will be back when the auto maker deals with the issue of a new additive that is used in Europe but has not met approval in the U.S.

It likely will be another 18 months before the issue is resolved and the diesel option is back for the U.S., says powertrain director Hatz.

apriddle@primediabusiness.com