In 2020, the Volkswagen Group delivered 9,305,400 cars to customers. That's a big number, especially considering that's what VW would call a bad year; a third again more than the Stellantis brand megalith (6.2 million) and 18 times more than Tesla, who over the same period delivered roughly 499,550 cars. So it's a strange situation to be wondering: can the VW Group compete with Tesla? Technoking Musk's throne is in, relatively speaking, one of those tiny city-states that mostly exists as an administrative error, relative to the giant who's allegedly angling to take it.
That's the headline out of Volkswagen's Power Day event earlier this week: The company's going to compete with Tesla. It's going to build six new gigafactories; it's going to put in charging networks on scales of investment not previously seen by an OEM across Europe, China and North America; and it's going to drive down the cost of batteries for its electric vehicles both by reducing manufacturing costs and using different anode and cathode materials to gain efficiencies. They're throwing $40 billion dollars at it which, on a good day, is less than a tenth of what Tesla's worth, after all.
The VW Group has taken a bizarrely haphazard approach to electrification. There have been reasons—since 2015, the auto giant has been undergoing the (rightly) vigorous beating it earned from the Dieselgate emissions scandal. By last year, this had definitely cost more than €31.3 billion ($37.3 billion) and is projected by some to be on course to top the $40 billion VW has just announced for investment, once all compensation is paid.
In 2015, VW wasn't making a vast number of electric vehicles. In 2020, it still isn't; of the 9,305,400 cars VW delivered last year, only 231,600 were all-electric, or slightly less than half the number Tesla managed. That's where the traditional automakers, no matter their current scale, are still playing catch-up to Elon & Co.; they haven't been making 'em, they're still not making 'em and it's pretty much impossible, when you're looking at the market for electric cars, not to say Tesla has had it pretty much all to play with while other companies slowly realized there was even a ball pit.
Tesla having a big market share of EVs is different to EVs gaining a big market share of the VW Group's output, though. At the end of the day, the number of people buying a brand new EV as their very first car is going to be smaller than the number of people buying a car from VW, which is where the plans from Power Day really come in. It's not fair to say that Volkswagen is trying to get competitive with Tesla—that would, frankly, understate the level of ambition declared. It's trying to compete with itself.
The problems the group is facing are pretty common for all EV producers. Battery costs are high, rare earth mineral demands are an increasing environmental and supply chain issue and it's getting very unavoidable that if we make all these batteries, we have to be able to do something with them afterward.
The first problem is: how do they make more batteries? In a sense, that's as bluntly answered as the image above. They're going to build battery factories until they can make enough. The first two factories will be at Skellefteå, Sweden and in Salzgitter, Germany, VW's existing base of battery (and basically everything else) operations.
There's then a plan to open one further factory in southern Europe, which was described as potentially Portugal, Spain or France, and another in eastern Europe, in Czechia, Poland or Slovakia. The subsequent two gigafactory locations haven't been decided, except that they'll be European, but their output has: all of them will be making an even 40GWh of battery products a year to meet VW Group's anticipated 240GWh of demand by 2030.
When you're an OEM of the scale of the VW Group, you really can point at towns in Europe and announce you're building a giant factory there without it being the kind of tweet that makes shareholders nervous. But building lots of gigantic new factories doesn't explain how it's planning to make things cheaper or to achieve a "closed circle" of recyclability.
That comes down to the decision to make batteries uniform across 80 percent of the VW Group's projected electric cars. The automaker announced that, although some very bespoke systems will be needed for a minority of its vehicles, it thinks it can produce batteries that are scalable from cars to semi-trucks that apply the same design ideas. That involves thinking about the vehicles on a three-tier system, depending on the level of performance required.
In terms of those rare earth mineral problems, VW isn't shying away from them. Its announcement included specifics about moving away from problem-causer lithium to alternative problem-causer nickel, manganese and for entry-level vehicles, iron-phosphate. That's key to what the group has announced, which is not just that it's going to make more EVs than Tesla.
What the VW Group has been doing already, with its Porsche Taycan, Audi E-Tron, VW ID.4 and all the other weirdly disparate projects it's started and announced platforms for, is imitating Tesla. A couple of lines a year that it can hope to maybe hit six-figures on sales of each, and give everybody a pat on the back at an investor conference over the Nordschliefe times of.
Building a few, pretty high-price electric vehicles is not a flex if you are one of the biggest automakers in the world. Volkswagen's market for EV sales is making them make sense to the customers already buying its cars worldwide, which can only happen if it makes them on a scale and at economies that can compete not with the Model 3 but with the cars rolling out of the factory next door, with the same logos on the hood.
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