The race to dominate the electric-vehicle industry may be getting tighter between Tesla and Volkswagen, as the German automobile giant revealed plans on Monday to reduce the cost of its batteries and operate a wide-ranging charging network.
In its first-ever “Power Day,” reminiscent of electric-car maker Tesla’s
TSLA,
much-hyped “Battery Day,” the German group that owns Volkswagen, Audi, and Porsche said it would rely on six gigafactories in Europe to secure supplies as the industry faces a looming battery shortage.
Shares in Volkswagen Group
VOW,
jumped up around 3% on Monday as the company’s top executives outlined a road map for technological expansion.
Electric vehicles have become Wolfsburg, Germany-based Volkswagen’s “core business,” said Herbert Diess, the chair of the group’s board of management, and its new plans come as the battle to dominate the fast-growing electric-vehicle space heats up.
According to analysts at UBS, EVs could penetrate 100% of the automobile market by 2040. Over the next few years, the Swiss bank projects that Volkswagen and Tesla will emerge as the market leaders, with the German company expected to catch up with Tesla in terms of total volume of cars sold as soon as next year.
Volkswagen ousted Tesla from the top of the European EV market in 2020, and now has 20% to 25% market share in this key region. Europe is the world’s second-largest electric-vehicle market after China, which is home to domestic EV manufacturers including NIO
NIO,
XPeng
XPEV,
and BYD
1211,
As car companies scramble in a sector-wide pivot to electric mobility, UBS said it expects the supply of battery cells required to feed demand will face “regional tightness this year and global shortages by 2025.”
To secure the batteries needed for expansion, Volskwagen said it will rely on six gigafactories by 2030. The first factories will be in the Swedish cities of Salzgitter and Skellefteå, where Volkswagen is constructing a factory with partner Northvolt.
Northvolt said on Monday that it had received a $14 billion order from Volkswagen for premium battery cells. The German group also increased its ownership stake in the Swedish company, founded by a former Tesla employee with backers including Goldman Sachs
GS,
and Spotify
SPOT,
Chief Executive Daniel Ek.
In addition, Volkswagen said it will look to drive down the cost of its batteries — the key factor in driving down the total cost of vehicles — by up to 50% over the next decade.
Cost savings in some form will be seen from 2023 onward, Volkswagen said, when the group plans to launch a new, unified battery cell that will be installed in 80% of its EVs by 2030.
“We aim to reduce the cost and complexity of the battery and at the same time increase its range and performance,” said Thomas Schmall, a member of Volkswagen’s technology board and the head of its technology road map. “This will finally make e-mobility affordable and the dominant drive technology.”
To support the widespread consumer adoption of electric vehicles, Volkswagen plans to increase the European vehicle charging network fivefold by 2025. Within the next few years, the company aims to operate 18,000 public fast-charging points, including 8,000 in partnership with oil major BP
BP,
Volkswagen will build another 3,500 charging points in North America by the end of 2021 through its U.S. subsidiary, Electrify America, as well as 17,000 charging points in China by 2025 through a joint venture.
Automotive analyst Matthias Schmidt told MarketWatch that “giant” manufacturers like Volkswagen “are slowly awakening and starting to demonstrate that size matters when it comes to an electric future regulation is forcing them into.”
More: Tesla is in decline, SUVs are king, and more insights from this key electric-vehicle market
European car makers are being pushed to manufacture more electric vehicles by the threat of hundreds of millions of euros in fines from the European Union over binding fleet emissions targets.
The race to transition toward electric mobility is also supported from the demand side, with many European governments offering thousands of dollars in tax breaks and subsidies for consumers to choose electric vehicles.
“VW announces a large cost advantage from scaling up production, deciding to vertically integrate in helping cut BEV costs on the road to price parity, critical once the subsidy scaffolding is slowly removed,” said Schmidt, who is also the publisher of European Electric Car Report.
