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The charging point on a Volkswagen electric car.
Liesa Johannssen-Koppitz / Bloomberg
Volkswagen
wants to be the leader in electric vehicles around the world. It’s not happy to play Pepsi against Teslas
Coca-Cola.
The German car giant has set out updated EV ambitions over the past few days during an investor event and a shareholders’ meeting.
Volkswagen
(ticker: VOW.Germany) has always had big EV goals, but the company is doubling down on a fully electric future for personal transportation.
In particular, the company plans to build six gigabytes by 2030. A gig factory has become an industrial jargon for a battery plant, thanks to
Tesla
(TSLA). Gigafactory is what Tesla called its huge Nevada battery facility
Panasonic
(6752.Japan).
Volkswagen’s batteries must be able to produce 240 gigawatt-hour batteries annually. Giga is short for a billion, but what investors need to know is that the production capacity can drive about four to five million EVs annually.
Battery plants become the new engine plants in the automotive industry.
Volkswagen will of course continue to buy batteries for the existing industry, and the company is also investing significantly
QuantumScape
(QS). Quantum is pioneering work with solid, lithium-anode batteries that promise lower cost, better safety, longer ranges and faster charging times than today’s lithium-ion EV technology.
As a context, VW delivered approximately 11 million vehicles in 2019, the year before the pandemic had sales from the industry. In 2020, Volkswagen sold approximately 230,000 all electric vehicles and more than 400,000 electrified vehicles, including hybrids and plug-in hybrid options. Tesla sold about 500,000 EVs in 2020.
Wales projects Tesla will deliver around 840,000 EVs by 2021. Volkswagen’s goal is to sell 1 million electrified vehicles this year. Volkswagen has also doubled its target for European EV sales by 2030. The German carmaker wants 70% of European sales by that time to be electric vehicles, which is the previous target of 35%.
“In 2030 we anticipate a 50% [battery-electric vehicle] share in our global deliveries, ”CEO Herbert Diess said in a conversation with shareholders on Tuesday. “In Europe, we expect about 60 percent.”
It’s all very ambitious. Falling costs will help the business get there. Volkswagen also believes that it will reduce the cost of batteries from now until 2030 by about 50%, but the absolute level of cost has not been announced. Batteries make up a large part of the total cost of an EV, and so a 50% reduction will greatly help to equate the sticker price of an EV to a petrol powered car.
However, more competition is not the death knell for Tesla. This is probably the death knell for petrol-powered cars. “VW Power Day confirms that EVs will become the standard,” Baird analyst Ben Kallo wrote in a research report on Monday. Kallo covers Tesla, not Volkswagen, and sees the VW event as a sign that EV penetration in the overall auto market will go faster than investors currently expect. However, he expects Tesla to remain the leader.
Kallo rates Tesla shares and has a price target of $ 736 for shares. Dan Ives, an analyst at Wedbush, covers Tesla, not VW. He assesses Tesla shares’ hold. However, Ives’ price target is higher than Kallo’s $ 950 per share.
Ives is asked by its customers if new competition is the reason for the recent sale of Tesla shares. Tesla shares fell 21% from their January high. His answer is an emphatic no.
“The EV party has just started,” writes Ives. Higher interest rates have weakened the high growth of the EV sector, but he is not worried. “The… transformation is just beginning because this industry is on the verge of a $ 50 billion market opportunity over the next decade.” This is a large number, but achievable, as global car sales easily earn $ 2 trillion annually.
That’s enough space for many winners and losers: VW and Tesla can both succeed.
Write to Al Root at [email protected]