The VW Group recently unveiled plans to attack the business of electric vehicles in a very aggressive manner. The company’s CEO, Herbert Diess, described VW’s EV transformation as “bigger than anything the industry has seen in the last century.” The VW Group, the second largest automaker behind Toyota, is a massive company with multiple global vehicle brands (VW, Audi, Porsche, Bentley, Lamborghini, SKODA, Bugatti, SEAT, MAN). Clearly, VW’s most recent EV announcement is a specific plan focused on catching and beating Tesla, the Wall Street darling of automakers.
VW is focusing on driving down battery costs below the magic level of $100 per kWh, the level many experts believe EVs reach cost parity with internal combustion engine (ICE) vehicles
VW plans to reduce battery costs by 50% for entry level vehicles, and by 30% for volume vehicles
VW will massively expand battery cell production with six battery factories operating in Europe by 2030 - an unstated acknowledgement that vertical integration for EVs is a competitive advantage
The company also is a major investor (along with Bill Gates) in the Silicon Valley startup, QuantumScape. QuantumScape is developing solid state batteries which have been called “the holy grail” by some battery experts. Among other attributes, solid state batteries provide 50% more range in EVs versus today’s lithium-ion batteries. VW is calling solid state batteries “the end game.”
VW is also expanding its charging station network. The company is planning 18,000 fast-charging stations in Europe by 2025. Additionally, VW is installing 17,000 fast-charging stations in China, and will reach 800 stations in the U.S. by 2021.
In 2022, VW’s EV platform will support bidirectional charging, allowing for vehicle energy to be driven back into the home network. There will be other product enablers for this including home energy storage systems
The company is planning for EVs to account for 20% of total sales by 2025, and is promising 75 EVs by 2029. VW estimates it will produce 26 million EVs this decade
VW will unify its EV platforms to a common design using standardized software. In fact, the company believes it will become Europe’s second largest software company, behind SAP
VW also is an investor in autonomous driving startup, Argo AI. The company is planning to utilize Argo technology for the integration of self-driving systems in its vehicles as well
This is a big list of EV plans clearly highlighting VW’s commitment to an all-electric future. In many ways it mirrors GM’s recently announced EV business plans as wells. GM is…
Developing a multi-vehicle modular propulsion system powered by a proprietary Ultium battery technology
Working to drive battery costs below $100/kWh
Planning and building new battery factories
Developing 20 new EVs globally by 2023, with plans to sell 1 million EVs in China by 2025
Utilizing its majority-owned Cruise autonomous driving subsidiary to develop a self-driving taxi service
I believe both VW and GM are further along in their transition to an EV future than any other legacy automaker.
Due to GM’s ownership of autonomous subsidiary, Cruise, GM will commercialize and drive revenue from a robo-taxi business much faster than VW. In fact, Cruise self-driving technology will be able to integrate into GM vehicles faster that VW can deploy self-driving technology in their cars. GM Super Cruise, available in certain Cadillac models today, is an example of this autonomous driving integration in current ICE models.
Tesla’s engineering advantages are so substantial that they cannot be easily copied or surpassed. - Sam Jaffe, Managing Director Cairne Energy Resource Advisors
Tesla has a substantial head start in all areas where VW and GM are making significant investments. I wrote about Tesla’s development advantages in a detailed Medium article last year. Then, I believed Tesla’s advantages were insurmountable. Today, it seems legacy automakers like VW and GM are making rapid advancements. However, it is clear, Tesla continues to advance the art of developing and manufacturing EVs as well as pushing the envelop on autonomous vehicle engineering.
Tesla recognized early the value of important vertical integration decisions for batteries, motors, and other key EV components
Tesla’s superiority at software development might never be equaled by legacy automakers
Tesla vehicles consistently have more driving range than competing EVs
Some describe Tesla’s electronic capability as “military grade” and unmatched by other automakers
Yet, for the investor, VW and GM could be the better investment today. VW’s market cap is $134 billion. GM’s market cap is only $60 billion. Tesla’s market cap is a whopping $629 billion, and that’s down from $840 billion earlier this year. One could make a coherent argument that Tesla’s share price is overvalued. It seems that VW, and especially GM, are both undervalued stocks.
I own shares of Tesla and General Motors.
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.