Tesla is well-versed in the skill of shaking things up. It might soon get a taste of what it’s like to be the one on the receiving end.
According to UBS analysts, Tesla could be surpassed in sales by Volkswagen as early as 2022, after years as the undisputed king of the electric car. In 2025, Europe’s largest carmaker will sell 300,000 more battery-electric cars than Tesla.
Putting an end to Tesla’s dominance will be a turning point in Volkswagen’s transition into a global electric car powerhouse. After being severely burnt by the diesel pollution scandal in 2015, Europe’s biggest carmaker is staking its reputation on emerging technologies and a radical move away from fossil fuels by spending $42 billion in electric cars.
This week, Volkswagen stressed the range of that ambition. It said that by 2025, it would sell over 2 million electric cars, develop its own network of massive battery plants, employ 6,500 IT experts over the next five years, launch its own operating system, and become Europe’s second-largest tech business behind SAP.
Investors have failed to understand the pace at which Volkswagen is gaining ground on Tesla, as well as the amount of money the German firm stands to make by going “all in” on electric cars before other existing carmakers such as Toyota and General Motors according to UBS analysts. The target price for Volkswagen stock has been increased by 50% to $358 by UBS.
In 2020, Volkswagen, the parent company of Porsche, Audi, Skoda, and SEAT, sold 231,600 battery-electric cars. While this is less than half of what Tesla sold last year, it marks a 214 percent rise over the previous year. Volkswagen plans to introduce 70 electric vehicles by the end of the decade, indicating that its rapid growth will continue.
Because of its modular development platform, or MEB, Volkswagen is in a different position than its competitors. The platform used to build the ID.3, an electric compact hatchback, would enable the automaker to manufacture a large number of vehicles rapidly while lowering costs.
Volkswagen announced plans on Monday to construct six battery “gigafactories” in Europe by 2030, with the aim of lowering the cost of its battery cells by up to 50%. “Lower prices for batteries means more affordable cars, which makes electric vehicles more attractive for customers,” Diess said.
Volkswagen is considerably less valuable than Tesla, despite a recent increase in its stock price. The competitor led by Elon Musk first overtook Volkswagen’s market share in January 2020, and the difference has grown significantly since then. Volkswagen has a market capitalization of $133 billion, while Tesla has a market capitalization of $680 billion.
Many investors say Tesla will be able to make a significant profit from its software advantage. Tesla will soon be able to charge owners a monthly fee to use its autonomous driving apps, in addition to providing wireless alerts to their vehicles. It’s far closer than existing carmakers like Volkswagen to shifting the essence of car ownership.
Wedbush Securities analyst Dan Ives previously said that the electric car industry is “Tesla’s world and everyone else is paying rent.” But, he said, with 150 carmakers chasing the same target, Tesla would have to stick to its plan.
The potential of both Volkswagen and Tesla to dominate the electric car industry is dependent on their ability to become more similar to one another. Volkswagen wants to update its software capability as fast as possible, while Tesla will benefit from Volkswagen’s ability to manufacture millions upon millions of high-quality vehicles per year.
With customers increasingly interested in electric vehicles, especially in Europe, the race between Volkswagen and Tesla will heat up quickly. Electric vehicles will account for 20% of global new vehicle purchases in 2015 and 50% by 2030, according to UBS.