wants to be the world leader in electric vehicles. Not satisfied playing Pepsi with Tesla
The German auto manufacturing giant unveiled updated electric vehicle ambitions in recent days, at an investor event and shareholders meeting.
(ticker: VOW.Germany) has always had big electric vehicle goals, but the company is doubling down on a future of all-electric personal transportation.
Notably, the company announced plans to build six gigafactories by 2030. A gigafactory has become industry jargon for a battery plant, thanks to
(TSLA). Gigafactory is what Tesla called his massive Nevada battery facility built with
Volkswagen’s battery plants should have the capacity to make 240 gigawatt hours of batteries each year. Giga is short for one billion, but what investors need to know is that that level of manufacturing capacity can power roughly four to five million electric vehicles a year.
Battery plants are becoming the new engine plants of the automotive industry.
Volkswagen will, of course, continue to buy batteries for the existing industry, and the company also has a considerable investment in
(QS). Quantum is a pioneer in solid-state lithium anode batteries that promise lower costs, better safety, longer ranges, and faster charge times than current lithium-ion battery technology for electric vehicles.
VW, for context, delivered about 11 million vehicles in 2019, the year before the pandemic hit industry sales. In 2020, Volkswagen sold around 230,000 fully 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 about 840,000 electric vehicles in 2021. Volkswagen’s goal is to sell 1 million electrified vehicles this year. Volkswagen also doubled its target for European EV sales by 2030. The German automaker wants 70% of European sales by then to be electrified vehicles, double the previous target of 35%.
“In 2030, we anticipate 50% [battery-electric vehicle] participate in our global deliveries, ”said CEO Herbert Diess in his Tuesday talk with shareholders. “In Europe we expect around 60 percent.”
All very ambitious. Falling costs will help the business get there. Volkswagen also believes it will reduce the cost of batteries by about 50% between now and 2030, but the absolute level of costs was not disclosed. Batteries are a large part of the total cost of an electric vehicle, so a 50% reduction would go a long way toward making the sticker price of an electric vehicle equivalent to that of a gasoline car.
However, more competition is not the death sentence for Tesla. However, it is more likely to be the death sentence for gasoline cars. “VW Power Day confirms that electric vehicles will become the standard,” wrote Baird analyst Ben Kallo in an investigative report on Monday. Kallo covers Tesla, not Volkswagen, and sees the VW event as a sign that EV penetration into the broader auto market will be faster than investors expect. However, he expects Tesla to remain the leader.
Kallo rates the Tesla Stock Buy and has a $ 736 price target for the stock. Wedbush analyst Dan Ives covers Tesla, not VW too. Rate the Tesla stock as a Hold. Ives’s price target, however, is higher than Kallo’s at $ 950 per share.
His clients ask Ives if new competition is the reason for the recent sell-off of Tesla shares. Tesla shares have plunged 21% from their January high. His answer is a resounding no.
“The EV party is just getting started,” writes Ives. Higher interest rates have hit the high-growth EV sector, but it’s not worried. “The… transformation is just beginning as this industry is on the cusp of a $ 5 trillion market opportunity over the next decade.” That’s a huge number, but achievable, considering global car sales easily top $ 2 trillion every year.
That’s enough room for a lot of winners and losers: VW and Tesla can succeed.
Write Al Root at [email protected]