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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Can Volkswagen Compete With Tesla?

Volkswagen AG’s new CEO, Herbert Diess, has taken on a corporate mission — to knock Tesla Inc. off its mantle as the global leader in electric vehicle innovation. To get there, the German vehicle manufacturer will double its capital investment in EV batteries.

During the April 3 annual shareholder meeting, Diess said VW is preparing to manufacture as many as 3 million EVs per year by 2025. To get there, the company will be spending 40 billion euros ($48 billion) on the lithium ion batteries needed to hit that sales volume.

That nearly matches Tesla’s market cap value, which closed Tuesday at $49.8 billion. VW closed the day at about $205 billion in market cap.

In early April, prior to Diess leaving his job as head of the VW brand and taking on the CEO position, the company had committed to spend about $21 billion in EV battery packs — a figure which has now more than doubled. Lithium-ion batteries continue to be costly and many times keep automakers in a conservative stance when considering ramping up EV production.

VW shareholders heard about the German automaker’s big plans for vehicle electrification just hours after Tesla CEO Elon Musk had berated analysts sitting in on Tesla’s quarterly earnings call.

Musk has become defensive and defiant in recent weeks as the company’s stock price declines and investors and analysts have begun losing faith in Tesla’s financial future. That stems from Musk’s aggressive Model 3 production targets that are still lagging behind, and the level of capitalization the company needs to add more production lines and build enough batteries. Some investors are concerned that Tesla has taken on too much with its heavy-duty Tesla Semi electric truck scheme. There are several other capital-intensive projects and subsidiaries that include solar power, energy storage, and fully autonomous vehicle technologies. Related: Trump Tears Up The Iran Deal

During Thursday’s earnings call, Musk insulted analysts by asking them to stop asking “boring” questions. He’d also cut off their questions about the company’s financial performance and plans for the next few quarters.

VW builds more cars in four days than Tesla does in a year, and its executives want to tap into the Tesla-competitive environment. Tesla delivered 101,312 Model S and Model X cars in 2017, and about 1,550 Model 3 deliveries. Volkswagen Group reported that VW and its 11 subsidiary brands sold 10.7 million vehicles in 2017.

Diess would like to see VW become the new global EV brand. The German automaker plans to harness its financial and engineering firepower to refurbish its image and lead the market in EV sales.

“By 2020 we will offer our customers more than 25 new electric models and more than 20 plug-in hybrids,” Diess said. “In just a few years’ time, then, across all brands and regions, we aim to put the world’s largest fleet of electric vehicles on the road.”

VW, which took the top spot in global new vehicle sales last year, is still in a precarious position in restoring its brand image to what it was before the “Dieselgate” scandal broke in September 2015.

Diess traveled to the U.S. last week to testify to federal officials about the carmaker’s emissions scandal, German newspaper Bild reported on Tuesday.

This took place last week soon after former CEO Martin Winterkorn was issued criminal charges and an arrest warrant for his role in the Dieselgate cover up. Matthias Muller, Winkerton’s successor as VW chief, left the top spot in February. 

Related: Qatar Petroleum To Boost Production Despite Blockade

VW also has to stabilize its home market of Germany, where government officials are still looking into the scandal. The country may approve class-action lawsuits in its courts, which is expected to draw VW into a wave of suits that will have to be settled at high costs, as has been the case in U.S. courts. Chancellor Angela Merkel has been dragging her feet on allowing class-action suits, but that’s expected to change course and be adopted soon in Germany. Merkel has taken a great deal of criticism for being perceived as attempting to protect VW and other German automakers.


Moving forward in its vehicle electrification strategy is a key element of transforming the company’s image into an ethical, innovative global corporation advocating clean vehicles and development of advanced vehicle technologies. To get there, VW won’t be going down a similar path followed by Tesla and its Gigafactory.

VW is bringing in partnerships with battery makers. So far, agreements have been made with LG Chem, Samsung, and Chinese battery maker Contemporary Amperex Technology Co. to supply batteries and technology. The automaker has no plans to start producing its own batteries, the company said.

By Jon LeSage for Oilprice.com

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  • Phil on May 09 2018 said:
    Well, if things continue to be going with Tesla as they are Volkswagen won't need to compete with Tesla by reason of the natural disappearance of the latter
    The only reason why Tesla isn't called Ponzi scheme is because the US laws allow such things to happen in broad daylight. A company that hasn't brought anything apart from massive losses since its very birth for a period of tens of years and that has market capitalization equal to that of GM! Well, I guess, it is not in the production of automobiles that potential competitors for Tesla should be sought for.. the real specialization and expertise of Tesla looks to be in a different sphere.
  • David Jones on May 10 2018 said:
    VW will likely have a hard time over the coming years in terms of EVs. Tesla may be running in the red but other car makers will face the same issues if they try to compete with Tesla on kWh per car terms. This is what drives the price up of EVs causing money drain and Tesla has the best technology in this critical segment. Everyone else has been playing the 20-40kWh game while Tesla has worked at 60-100kWh level and has at the same time produced more pure EVs than just about all other companies. Even the Leaf (320000 units sold and the only real EV world wide production push) trails behind the Model S in terms of cumulative kWh cars sold. Everyone is going to have to make a major push for batteries now and as they clamor to get these, they will run into a wall within the next 2 years, maybe even sooner (Hyundai Ioniq EV is exhibit A). Tesla no doubt already secured supplies of critical materials since they have been planning this expansion for a decade.

    Let's also keep in mind that while Tesla delivered 1550 Model 3s in 2017, it delivered almost 13000 Model 3s in 2018 up to the end of April with about 2200 per week production speed at the end of Q1. Latest numbers look to be projecting 3000 per week very soon (next week possibly). That is a ramp up of enormous proportions in the EV world and if Tesla can survive the next few years financially, they will likely be building half a million pure 50-60kWh EVs before anyone else has even managed to reach an equivalent model yearly production capacity of 50000.

    The 20 brands VW speaks of will probably be production limited to the extreme, I am very skeptical about the prospects of these companies of managing to scale up battery production to meet such EV numbers even at 50k per model per year, assuming other car makers make such a push as well, it'll be a blood bath for battery materials.
  • snoopyloopy on May 10 2018 said:
    If VW is going to become the "world leader" in EVs by 2025, accomplishing that will be an even more remarkable story than Tesla's to date. We do know that the demand is there since at the moment, they're unable to fill all the potential orders for the e-Golf/Golf GTE, despite them being conversions and the relatively limited markets where they're available. But the fact that they can't deliver on what are realistically minute numbers any better than Tesla can doesn't bode well for the prospects of achieving that goal. This battery order is a good first step, we'll see what actually comes out of it.

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