Analysis: Volkswagen Gets Reality Check After Tesla Milestones Week

  • Tesla completes three milestones in one week
  • Volkswagen lowers outlook, announces drop in third quarter profits
  • Volkswagen wants to overtake Tesla by 2025
  • The gap between the two companies is widening – analysts

FRANKFURT, October 29 (Reuters) – It has been a sobering week for Herbert Diess’ ambitions for electric vehicles.

As Tesla (TSLA.O) joined the trillion dollar club, received a landmark order from Hertz and set a new sales record in Europe, the Volkswagen boss (VOWG_p.DE) presented a weaker outlook for sales and shipments and lower quarterly profits. which made one point: dethroning Elon Musk as king of electric vehicles (EVs) has become much more difficult. Read more

“Tesla’s recent accomplishments send a clear message,” Diess told analysts during a third-quarter earnings call Thursday that ended up focusing on Tesla.

“We have to prepare for a new phase of competition.”

A longtime admirer of Musk, Diess has stepped up the pressure this year and presented plans – including establishing six major battery factories in Europe – to overtake U.S. rival VW as the world’s largest seller of electric vehicles. ‘by 2025.

But a chronic semiconductor shortage has slowed Volkswagen’s progress, exposing the disadvantage that automakers have over luxury competitors who sell fewer vehicles.

And with Tesla worth nearly eight times as much as VW while only selling 5% of cars, and its Model 3 becoming the very first EV to lead monthly European sales, at this point it’s more about keeping pace. , not to catch up.

“They have a gap in terms of growth margins. They seem to have structurally better access to chips. They seem to have better structural access to batteries”, Patrick Hummel, head of European and American research on automotive and mobility at UBS. , said during the call with Diess.

To make matters worse, Musk will soon begin producing cars at Tesla’s state-of-the-art factory in Gruenheide near Berlin, taking the battle for global automotive dominance to Germany, where some of the first automobiles were invented.

Diess, 63, who pulled the automaker out of its Dieselgate emissions fraud scandal, said it would force local heavyweights to dramatically increase their level of play to stop falling behind.

“Tesla Gruenheide is for sure a new benchmark for us, setting new benchmarks in speed, productivity, lean management and we have to adapt to that,” he said on a call with reporters .

KEEP YOUR FRIENDS CLOSE, BUT YOUR ENEMIES CLOSER

Diess, who years ago received an offer to lead Tesla, has repeatedly highlighted Musk’s success as the electric vehicle pioneer that disrupted established auto industry habits and whose $ 1,000 billion valuation of dollars eclipses that of Volkswagen.

Even though Volkswagen shares have risen 28% so far this year, its current valuation of around 121 billion euros ($ 141 billion) is a far cry from the 200 billion that Diess estimates the company, which includes luxury brands Porsche and Audi, is worth. Read more

Diess, who became CEO of Volkswagen in 2018, even invited Musk to speak to his managers this month, seen as a move to pressure senior management to act faster to catch up with the U.S. automaker. Read more

A central part of this push will be Volkswagen’s Trinity project, under which the automaker wants to build a flagship EV sedan at its Wolfsburg plant from 2025/26 and turn the plant into a challenger to the Gruenheide site of You’re here.

The plan includes reducing the time it takes to assemble electric vehicles to around 10 hours, Volkswagen CFO Arno Antlitz told Reuters about the same time it takes Tesla to build its Model 3.

It’s also clear that it will mean fewer jobs, which carries the risk of long and painful battles with worker representatives, who have traditionally wielded significant power at the world’s second-largest car maker.

“We have to prepare for manufacturing for a much smaller workforce in some of the lines. We have to prepare for less complexity, more speed, more line speed,” said Diess.

Earlier this week, Volkswagen’s new union boss criticized Diess for focusing too much on investors and not investing enough in the workforce, fearing that changing electric vehicles could cost dozens. thousands of jobs. Read more

CFO Antlitz said that while management and workers can agree on the need to overhaul Wolfsburg, he acknowledged that it could be difficult to find common ground.

“Of course there is the question, as usual, of ‘how to get there’ but I am convinced that we share this same vision with the works council.”

When asked to comment, a spokesperson for Diess referred to his comments on Thursday. Spokesmen for Tesla in Germany were not immediately available for comment.

($ 1 = € 0.8579)

Reporting by Christoph Steitz. Additional reporting by Jan Schwartz. Editing by Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.


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