Interview: Volkswagen SA to lease rather than sell its electric cars

Most people buy their cars on finance these days, but if you like to change your Volkswagen car every few years, leasing can be the cheapest option. The German brand already makes this possible whether you’re after a Polo or any of the stylish new SUVs it has recently launched.

Leasing, however, will be the initial and only way to own any of its upcoming electric cars, including the ID.3 hatch and ID.4 SUV which arrive in SA either late in 2023 or early 2024, according to Steffen Knapp, head of Volkswagen passenger cars in SA.

“Our cousins at Audi have a different system and their E-tron cars appeal to a few individuals who can afford them. As a mass market brand, when we get our electric cars to market we have to go to 500 to 1,000 cars. That is our position in this market,” says Knapp.

It will be interesting to see if the leasing option that’s done in conjunction with VW Financial Services SA will positively affect the slow uptake of electric cars in SA. Knapp mentions two main challenges facing SA customers when it comes to purchasing EVs: range anxiety and residual value.

On the former, he says their EVs can get about 400-500km on a full charge, and that most customers will be based in big cities and don’t need to drive long distances. The residual value hurdle generally includes a balloon payment at the end of the finance agreement, and is not the case in many other markets.

“With the leasing element SA customers can take an electric car and bring it back after three years where they have the option to walk away or refinance a new model,” says Knapp.

Leasing will alleviate much of the financial load for customers as everything from maintenance to insurance will be handled by VWSA.

“The customer only has to worry about recharging costs, which have been proven to be much cheaper than fuelling a conventional car.”

Knapp admits that SA customers generally do not like leasing, though the trend is changing. This rate of change, as seen in other consumables industries, is driven by younger people who are increasingly becoming users rather than owners, as they prefer up-to-date relevance instead of legacy possessions. 

Leasing brings other benefits for the changing landscape of selling vehicles. Knapp says the new frontier in cars is over-the-air updates, which many cars are already equipped with in SA. This technology allows cars to have upgrades done remotely, but in the near future will see on-demand and subscription-based features beamed to cars. 

As an example, if it is winter and a customer wants heated seats, they will simply log on to an app and purchase the feature which will then be available in their cars for subscribed periods. 

Furthermore, on-demand features will solve another long-standing headache where car companies don’t know the whereabouts of millions of cars that have been sold. With remote services, if a car is sold by an owner to another buyer, the new owner may also want to tap into the same features, which then keeps the whereabouts of the vehicle within the loop and enables VW dealers to keep in touch with that customer.

Knapp cannot confirm what the EV’s monthly leasing costs will be, but the aim is for parity between normal finance and this more flexible acquisition method. The lease agreement will be for a minimum of 36 months.