Volkswagen Could Soon Dethrone Tesla As It Goes All-In On Electric Cars
In this day and age, when you think of electric vehicles, the first name that comes to mind is likely Tesla. The California-based company run by Elon Musk has dominated the electric vehicle (EV) industry for the past few years and it remains to be a trailblazer for the global transition to clean, sustainable energy. But now, with many other manufacturers also plugging into the craze, it looks like the long-running king of EVs could very well be dethroned from its top spot.
One company that intends to end Tesla’s reign, in particular, is Volkswagen. The world’s number-two automaker aims to become the next global EV powerhouse, and it has invested $42 billion in EVs in pursuit of that goal. The company’s massive expansion plans include the construction of six battery-cell plants across Europe by 2030, the hiring of 6,500 IT experts over the next five years, and the global development of its charging infrastructure to support the adoption of its battery-powered cars. Overall, Volkswagen is making a monumental shift away from fossil fuels and is staking its future on the novel technologies that made Tesla a household name.
Despite eyeing the crown, Herbert Diess, the CEO of Volkswagen, still praised Tesla’s achievements; particularly with regards to its software development. “Tesla is not only about electric vehicles. Tesla is also very strong in software,” he told CNN. “They really run the car as a device. They are making good progress on the autonomous thing. But yes, we are going to challenge Tesla.”
While Volkswagen only sold less than half the number of EVs as Tesla last year, those sales still constituted an impressive 214% increase from 2019. That number is only expected to grow as Volkswagen rolls out 70 new EVs in every class and model size over the next couple of years.
Interestingly enough, analysts at UBS already have Volkswagen (VLKAF) matching Tesla (TSLA) sale-for-sale as early as 2022. They believe that the impressive speed at which Volkswagen is catching up to Tesla is being overlooked by investors and that underestimating the company could result in a huge missed opportunity. In keeping with this line of thinking, UBS has upped its target price for Volkswagen shares by 50% to $358.
UBS analyst Patrick Hummel told CNN that they are confident Volkswagen “will deliver the unique combination of volume growth” and that as soon as next year, their margins “will be stable” or “grow” from this point on.
Some analysts even have Volkswagen overtaking Tesla in terms of EV unit sales this year. According to GLJ Research analyst Gordon Johnson, the company is expected to deliver 1 million EVs over the course of 2021, whereas Tesla—although anticipating a 50% rise in its deliveries—is only expected to sell 750,000 EVs in the same time frame.
Like Tesla, Volkswagen is an industry disrupter itself—historically, the German company has given American competitors a run for their money, and it continues to do so today with its advanced innovations and forward-thinking solutions. That said, it is not without its fair share of controversies. In 2015, Volkswagen was scorched by its diesel emissions scandal in which the US Environmental Protection Agency exposed the company for using illegal software in its turbodiesel variants to cheat US emissions standards.
Additionally, part of the appeal of Tesla’s line-up is the fact that they are widely considered luxury vehicles, which is likely more a consequence of the company’s active targeting of the luxury market. Volkswagen, on the other hand, has always produced mass-market vehicles, so it’s hard to say whether their EVs will be embraced by the Tesla consumer to the same degree. Only time will tell whether Volkswagen’s EV gamble will pay off.
“We find ourselves in a new playing field — up against companies that are entering the mobility market from the world of technology,” Diess added. “Stock market players still regard the Volkswagen Group as part of the ‘old auto’ world. By focusing consistently on software and efficiency, we are working to change this view.”