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The charging point of a Volkswagen electric car.
Liesa Johannssen-Koppitz / Bloomberg
Volkswagen
wants to be the global leader in electric vehicles. It’s not content to play Pepsi for Teslas
Coca Cola
The German automaker explained updated EV ambitions in recent 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 the future of all-electric personal transportation.
Notably, the company announced plans to build six giga factories by 2030.
Tesla
(TSLA). Gigafactory is what Tesla called its massive Nevada battery facility built with
Panasonic
(6752. Japan).
Volkswagen’s battery factories should have the capacity to produce 240 gigawatt hours of batteries every year. Giga is short for a billion, but what investors need to know is that that level of production capacity can power roughly four to five million electric vehicles per year.
Battery factories are becoming the new engine factories of the automotive industry.
Volkswagen will of course continue to buy batteries for the existing industry and the company is also investing heavily in this
QuantumScape
(QS). Quantum is a pioneer in solid-state lithium-anode batteries that promise lower cost, better safety, longer range and faster charge times than current lithium-ion EV battery technology.
VW, for context, delivered about 11 million vehicles in 2019, the year before the pandemic hit industry sales. In 2020, Volkswagen sold approximately 230,000 fully electric vehicles and more than 400,000 electric vehicles, including hybrids and plug-in hybrid options. Tesla sold approximately 500,000 electric vehicles in 2020.
Wall Street Projects Tesla will deliver approximately 840,000 electric vehicles by 2021. Volkswagen aims to sell 1 million electric vehicles this year. Volkswagen also doubled its target for European sales of electric vehicles by 2030. The German carmaker wants 70% of European sales to be electric vehicles by then, doubling the previous target of 35%.
“In 2030 we foresee a 50% [battery-electric vehicle] share in our global deliveries, ”said CEO Herbert Diess in his Tuesday meeting with shareholders. “We expect about 60 percent in Europe.”
It’s all very ambitious. Falling costs help the business get there. Volkswagen also believes it will cut battery costs by about 50% between now and 2030, but the absolute cost level has not been disclosed. Batteries are a big part of the total cost of an electric car, so a 50% reduction would make the price of an EV sticker significantly the same as that of a gasoline-powered car.
However, more competition is not the death knell for Tesla. However, it is more likely to be the death knell for gasoline 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 signal that EV penetration of the overall auto market will go faster than investors currently expect. However, he expects Tesla to remain in the lead.
Kallo is reviewing buying Tesla stock and has a $ 736 price target for stock. Wedbush analyst Dan Ives refers to Tesla, not VW. He assesses Tesla Hold stock. However, Ives’ target price is higher than Kallo’s at $ 950 per share.
Ives is asked by his customers if new competition is the reason for the recent sell-off of Tesla stock. Tesla shares are down 21% from their January high. His answer is an emphatic no.
“The EV party has only just begun,” Ives writes. Higher interest rates have hurt the fast-growing EV industry, but he’s not worried. “The… transformation has only just begun as this industry is on the brink of a $ 5 trillion market opportunity over the next decade.” That’s a huge number, but achievable as global car sales easily exceed $ 2 trillion.
That’s enough room for many winners and losers: VW and Tesla can both succeed.
Write to Al Root at [email protected]