The race to dominate the electric vehicle industry may be getting tougher, as Volkswagen, the German auto giant and rival to Tesla, unveiled plans on Monday to reduce the cost of batteries and operate a broad charging network.
In his first “Power Day”, reminiscent of TSLA from electric car maker Tesla,
highly praised “Battery Day”, the German group that owns the brands Volkswagen, Audi and Porsche said that it would have six gigafactories in Europe to guarantee the supply, since the industry faces an imminent shortage.
Volkswagen Group VOW shares,
VWAGY,
VWAPY,
rose about 3% on Monday, when the company’s top executives drew up a roadmap for technological expansion.
Electric vehicles have become the company’s core business in Wolfsburg, Germany, said Herbert Diess, chairman of the group’s board of directors, and its new plans come as the battle to dominate the growing space for electric vehicles heats up.
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According to UBS analysts, EVs can reach 100% penetration in the auto market by 2040. In the coming years, the Swiss bank projects that Volkswagen and Tesla will emerge as market leaders, with the German company hoping to catch up with Tesla in terms of total volume of electric vehicles sold as early as next year.
Volkswagen expelled Tesla from its top position in the European electric vehicle market in 2020 and now has a 20% to 25% market share in this key region. Europe is the second largest electric vehicle market in the world, after China, which houses domestic electric vehicle manufacturers, including Nio NIO,
XPeng XPEV,
and BYD 1211,
As auto companies struggle on a sectoral pivot for electric mobility, UBS said it expects the supply of battery cells needed to fuel demand will face “regional tightening this year and global shortages in 2025”.
To guarantee the batteries needed for the expansion, Volskwagen said it will have six gigafactories by 2030. The first factories will be in the Swedish cities of Salzgitter and Skellefteå, where Volkswagen is building a factory with partner Northvolt.
Read More: Volkswagen and Northvolt, backed by Goldman Sachs, shatter Cuberg from Silicon Valley as the electric vehicle battery race heats up
Northvolt said on Monday it had received a $ 14 billion order from Volkswagen for premium battery cells. The German group also increased its stake in the Swedish company, founded by a former Tesla employee with sponsors, including Goldman Sachs GS,
and Spotify SPOT,
Chief Executive, Daniel Ek.
In addition, Volkswagen said it will try to reduce the cost of its batteries – the key factor in reducing the total cost of vehicles – by up to 50% in the next decade.
The cost savings will somehow be seen from 2023 onwards, Volkswagen said, when the group plans to launch a new unified battery cell that will be installed in 80% of its EVs by 2030.
“Our goal is to reduce the cost and complexity of the battery while increasing its range and performance,” said Thomas Schmall, a member of Volkswagen’s technology board and head of its technology roadmap. “This will finally make e-mobility accessible and the driving technology dominant.”
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To support the widespread adoption of electric vehicles by consumers, Volkswagen plans to increase the European vehicle charging network five times by 2025. In the coming years, the company plans to operate 18,000 public fast charging points, including 8,000 in partnership with oil company BP BP,
Volkswagen will build an additional 3,500 charging points in North America by the end of 2021 through its US subsidiary, Electrify America, as well as 17,000 charging points in China by 2025 through a joint venture.
Automotive Analyst Matthias Schmidt told MarketWatch that “giant” manufacturers like Volkswagen “are slowly waking up and starting to demonstrate that size matters when it comes to an electric future [that] regulation is forcing them to enter.
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European automakers are being pressured to manufacture more electric vehicles with the threat of fines of hundreds of millions of euros from the European Union over mandatory emissions targets for fleets.
The race to transition to electric mobility is also supported on the demand side, with many European governments offering thousands of dollars in tax incentives and subsidies for consumers to choose electric vehicles.
“VW announces a major cost advantage with increased production, deciding to integrate vertically to help cut BEV costs on the way to price parity, critical since the subsidy scaffolding is slowly removed,” said Schmidt, who is also editor of the European Electric Car Report.