Volkswagen shoots at Tesla: building its own European giga factories

German automaker Volkswagen has big plans to challenge Tesla; from opening 6 battery factories to rolling out an entire charging grid over multiple continents, the company is on the move.

Key takeaways about Volkswagen's development

  • Volkswagen is getting ready to challenge Tesla for the title of EV champion.
  • The German car manufacturer plans to build 6 battery factories over the next decade to gain a better control over the EV production and technology.
  • The main goals are to reduce costs and avoid shortages.
  • Volkswagen will also roll out its charging stations project, with 18,000 stations in Europe, and over 10,000 abroad.
  • Following the news and positive earnings reports, their stock surged 30% on Tuesday morning.
  • Volkswagen sold 231,600 EV last year, less than half of Tesla, but 214% increase from the previous year.


Volkswagen bows to electric vehicles

"E-mobility has won the race. Our goal is to secure a pole position in the global scaling of batteries." said Herbet Diess, Volkswagen Group CEO, on Monday during their “Power Day”, an event to announce their latest plans.

The second-largest car manufacturer in the world by sales exposed its roadmap to fully integrate electric vehicles into its production. With the new MEB platform, a VW car will be connected to homes, and will even be able to transfer energy, to save money and reduce carbon emissions.

“Not only will customers be more independent of the public power grid, they will also save money and reduce CO2 emissions. Models based on Volkswagen’s own MEB platform will support this technology from 2022. Volkswagen will also offer a complete package with all modules and digital services – from the bidirectional wall box to energy management. The technology is soon to be used on a larger scale – for example, in residential buildings, businesses or in the general power grid.”

The MEB platform is a modular battery pack which will be able to fit different-sized vehicles, with an integrated motor and electronics. It will also be utilized for other brands of the group, such as Audi, SEAT and Skoda.


Volkswagen will invest in 6 large battery factories

The world’s automotive industry is pivoting to electric vehicles to meet new sustainability requirements, creating an increasing need to build means of production and the infrastructure that comes with it. Europe especially, thanks to generous government incentives for buyers, is becoming the world’s largest EV market.

As one of the leaders of the auto industry, Volkswagen wants to take control of this EV boom and position itself as one of the leaders of the transformation. On Monday, they announced their plan to take control of their battery production needs as well as installing a vast, high-speed charging network over the next decade.

First, through a partnership with NorthVolt, a Swedish battery start-up, which will build high-quality batteries for Volkswagen’s premium cars. The German manufacturers will also take NorthVolt’s stakes in their joint venture in Salzgitter, a battery plant. This will give them control of 2 plants in Europe.

Secondly, they plan on building 4 additional factories in the coming year, creating 240 gigawatts hours of battery capacity, which should suffice to provide enough batteries for 4 million cars, 40% of the group’s annual production. In the long term, they plan to boost electric cars to 75% of their new car sales by 2030.


Vw car electric models


The goal: take control of production and avoid shortages

To this day, Volkswagen’s plan is one of the biggest efforts in the automotive industry to secure local supply and gain increased control over the technology.

What the company really wants to avoid is being stuck and dependent on foreign manufacturers to produce their cars. The present semiconductor shortage is a good lesson showing them how a whole industry can be impaired if one crucial element comes amiss. Battery shortages, which could happen following the enthusiasm around EVs, would be a strong blow to their business.

In the end, the goal is to stop relying solely on Asia, and make sure that foreign suppliers are here to fill the gap between what Europe can produce and what Europe needs, but no more.

Finally, the company will also try to make e-mobility more affordable, driving the cost of batteries under $100 per kilowatt hour. This is thanks to a new unified battery cell, which will be launched in 2023 and installed in up to 80% of the group's electric vehicles. It will be a one size fits almost all, to reduce the massive cost of batteries, from 50% of the total cost to 30%.“We aim to reduce the cost of the battery and at the same time increase its range and performance,” said Thomas Schmall, the company board member in charge of technology and components.


Volkswagen mounting its own charging network

Another part of Volkswagen’s massive plan is to build their very own charging system. Apart from Tesla, not many EV companies have installed such as system. As you may know, the difficulty of finding these points to charge your car remains one of the main drawbacks to the EV concept.

Volkswagen announced its project to operate 18,000 public fast-charging stations by 2025 in Europe, partnering with energy companies such as BP, Iberdola or Enel. This represents a fivefold expansion compared to today, and their stations should cover around 33% of the demand by that time.

They also plan to build 3,500 of these stations by the end of the year in the US, through their joint venture: Electrify America. 17,000 of these stations are also being targeted by Volkswagen in China, through their CAMS joint venture. For comparison purposes, Tesla currently operates around 20,000 charging stations.


Volkswagen’s stock surged following the news

Volkswagen's stock price soared 30% on Tuesday morning, after the company laid out its plan to dethrone Tesla as the king of EVs.


Volkswagen stock price surging


"The company is aiming to achieve an operating margin between 7% and 8% after 2021. VOW also confirmed it is looking to finish the year at the upper and of a 5% - 6.5% range in 2021. Higher profitability will be achieved through lower costs with as much as 2 billion euros savings identified for 2023 compared to 2020," according to StreetInsider.

One thing is certain, the project looks promising and in tune with current trends. Will Tesla be affected by the attacks of other serious competitors?


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