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The charging point of a Volkswagen electric car.
Liesa Johannssen-Koppitz / Bloomberg
Volkswagen
wants to be a leader in electric vehicles worldwide. Not satisfied with playing Pepsi at Tesla’s
Coke.
The German auto giant exposed up-to-date EV ambitions in the past few days at an event for investors and a shareholders’ meeting.
Volkswagen
(ticker: VOW.Germany) has always had big EV goals, but the company is doubling up on a fully electric personal transport future.
In particular, the company announced plans to build six gigafactories by 2030. One gigafactory has become industry jargon for a battery factory, thanks to
Tesla
(TSLA). Gigafactory is what Tesla called its huge Nevada battery facility built with
Panasonic
(6752.Japan).
Volkswagen’s battery factories should be able 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 feed approximately four to five million EVs a year.
Battery factories are becoming the new engine factories in the automotive industry.
Volkswagen, of course, will continue to buy batteries for the existing industry, and the company also has a considerable investment in
QuantumScape
(QS). Quantum is a pioneer in solid-state lithium anode batteries that promise lower costs, better safety, longer intervals and faster charging times than current lithium-ion EV battery technology.
VW, for contextual purposes, delivered about 11 million vehicles in 2019, a year before the pandemic hit sector sales. In 2020, Volkswagen sold about 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.
Wall Street projects that Tesla will deliver about 840,000 EVs in 2021. Volkswagen’s goal is to sell 1 million electrified vehicles this year. Volkswagen also doubled its sales target for European electric vehicles by 2030. The German automaker wants 70% of European sales so far to be electrified vehicles, double the previous target of 35%.
“In 2030, we expect a 50% [battery-electric vehicle] participation in our global deliveries, ”said CEO Herbert Diess in his conversation with shareholders on Tuesday. “In Europe, we expect about 60 percent.”
Everything is very ambitious. Reducing costs will help the company get there. Volkswagen also believes that it will reduce the cost of batteries by about 50% by 2030, but the absolute level of costs has not been disclosed. Batteries are a big part of an EV’s overall cost, so a 50% reduction would go a long way in making the EV tag price equivalent to a gas-powered car.
However, more competition is not the death sentence for Tesla. It is, most likely, the death sentence for gasoline-powered cars, however. “VW Power Day confirms that EVs should become the standard,” wrote Baird analyst Ben Kallo in a research report on Monday. Kallo covers Tesla, not Volkswagen, and sees the VW event as a sign that EV penetration in the automotive market in general will be faster than investors currently expect. He expects Tesla, however, to remain the leader.
Kallo values Tesla’s shares as Buy and has a target price of $ 736 for the shares. Wedbush analyst Dan Ives covers Tesla, not VW either. He classifies Tesla’s shares as Hold. Ives’ target price, however, is higher than Kallo’s, at $ 950 per share.
Ives is being asked by his customers whether the new competition is the reason for the recent sale of Tesla shares. Tesla’s shares plunged 21% from January’s high. Your answer is an emphatic no.
“The EV party is just beginning,” writes Ives. Higher interest rates have affected the high-growth EV sector, but he is not concerned. “The…. The transformation is just beginning, as this industry is on the verge of a $ 5 trillion market opportunity in the next decade.” It is a huge but reachable number, considering that global auto sales reach the US easily. $ 2 trillion each year.
This is enough space for many winners and losers: VW and Tesla can succeed.
Write to Al Root at [email protected]