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The charging point on a Volkswagen electric automobile.
Liesa Johannssen-Koppitz / Bloomberg
Volkswagen
wants to be the leader in electric vehicles in the world. He’s not happy playing Pepsi at Tesla
Coca Cola.
The German auto giant presented its updated EV ambitions over the past two days at an investor event and a shareholders meeting.
Volkswagen
(ticker: VOW.Germany) has always had big EV goals, but the company is doubling down on its future in fully electric personal transportation.
In particular, the company has announced plans to build six gigafactories by 2030. A gigafactory has become industry jargon for a battery factory, thanks to
You’re here
(TSLA). Gigafactory is what Tesla called its massive Nevada battery facility built with
Panasonic
(6752.Japan).
Volkswagen’s battery factories are expected to have the capacity to manufacture 240 gigawatt hours of batteries per year. Giga is short for a billion, but what investors need to know is that this level of manufacturing capacity can power roughly four to five million EVs per year.
Battery factories are becoming the new engine factories of the automotive industry.
Volkswagen, of course, will continue to purchase batteries for the existing industry, and the company also has a significant investment in
QuantumScape
(QS). Quantum is the pioneer of solid-state anode lithium batteries that promise lower costs, better safety, longer ranges and faster charge times than current lithium-ion EV battery technology.
VW, for context, delivered around 11 million vehicles in 2019, the year before the pandemic hit industry sales. In 2020, Volkswagen sold around 230,000 all-electric vehicles and more than 400,000 electrified vehicles, including hybrids and plug-in hybrid options. Tesla sold around 500,000 electric vehicles in 2020.
Wall Street projects that Tesla will deliver around 840,000 electric vehicles in 2021. Volkswagen’s goal is to sell 1 million electrified vehicles this year. Volkswagen has also doubled its target for European sales of electric vehicles by 2030. The German automaker wants 70% of European sales to be electrified by then, double the previous target of 35%.
“In 2030, we expect a 50% [battery-electric vehicle] participate in our global deliveries, ”CEO Herbert Diess said in his meeting with shareholders on Tuesday. “In Europe, we are forecasting around 60%.”
This is all very ambitious. Lowering costs will help the business achieve this. Volkswagen also believes it will reduce the cost of batteries by around 50% by 2030, but the absolute level of costs has not been disclosed. Batteries are a large part of the overall cost of an electric vehicle, so a 50% reduction would go a long way in making the sticker price of an electric vehicle equivalent to that of a gasoline car.
However, more competition is not the end of Tesla. It is, more likely, the death knell of gasoline cars. “VW Power Day confirms that electric vehicles are fast becoming the norm,” Baird analyst Ben Kallo wrote in a research report released on Monday. Kallo is covering Tesla, not Volkswagen, and sees the VW event as a signal that the penetration of electric vehicles into the global auto market will go faster than investors are currently anticipating. He expects Tesla to remain the leader, however.
Kallo values buying Tesla shares and has a target price of $ 736 for the shares. Wedbush analyst Dan Ives covers Tesla, not VW too. It values Tesla Hold stocks. Ives’ price target, however, is higher than Kallo’s at $ 950 a share.
Ives is asked by his customers if new competition is the reason for the recent sale of Tesla shares. Tesla shares are down 21% from their January high. His answer is a categorical no.
“The EV party has only just begun,” writes Ives. Rising interest rates rocked the high-growth EV industry, but it’s not worried. “The…. Transformation is just beginning, as this industry is on the cusp of a $ 5,000 billion market opportunity over the next decade.” That’s a huge, but achievable figure, being given that global auto sales easily exceed $ 2 trillion each year.
That’s enough space for many winners and losers: VW and Tesla can both be successful.
Write to Al Root at [email protected]
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