A report from consulting and research firm Wood Mackenzie claims that German automotive maker Volkswagen is on its way to being the world’s largest manufacturer of electric cars by 2030.
This is a major prediction since Volkswagen is currently the 10th largest manufacturer of battery electric vehicles, also known as BEVs.
What The Report Says
According to the report, Volkswagen will produce about 14 million BEVs by 2028. The expected figure is considerably lower than Volkswagen’s own target that is to produce at least 22 million electric cars by 2028.
According to analysts at Wood Mackenzie, the company’s target looks quite unrealistic in the current scenario. Given the current and expected size of the market, the company will have to capture 53% of the global market by 2028 to be able to sell 22 million electric vehicles.
This is going to be quite a challenge since VW will face stiff competition from other manufacturers.
Competition in the Growing Industry
One of VW’s largest competitions is Tesla. The company is ramping up products at a rapid pace.
WoodMac measured the potential of Tesla in a separate report that expects the company to sell about 6 million electric vehicles by 2028. However, the car manufacturer can hit the 8 million mark if it manages to release an entry-level vehicle expected to cost about $25,000 before 2028.
Tesla wants to control 1% of all global car sales and BEVs are not the company’s only focus. However, according to the report, it will have a difficult time attaining its goals unless the company broadens its offering.
The report says that the introduction of an entry level car can boost Tesla’s sales, especially since Toyota Prius, priced at $24,200 is its most “most frequently traded in car for a Tesla Model 3.”
If the company pulls it off and releases a car around this price then it may be able to reach its goal by 2024, predicts the report.
Tesla appears to be doing quite well despite not turning a profit last year. Its share prices went above $500 for the first time in 2019 due to factory progress in China and analyst upgrades.
“The company has secured $1.6 billion [of] financing from state-backed lenders at interest rates lower than the People’s Bank of China’s market rate. It also has…contracts with LG Chem and CATL to supply battery packs for its new factory.”
The company is expected to open a new manufacturing facility in Berlin, Germany. This will dramatically increase Tesla’s production capacity.
The report calls this diversification of factories a smart move as it will help dilute the impact of trade wars.
While Tesla is expected to give stiff competition to Volkswagen, it’s not alone in the race. Established manufacturers are ripping up their business models to adapt to a changing world where electricity will replace diesel and gasoline.
What Volkswagen Is Doing
The group that owns popular names like Skoda, SEAT, Lamborghini, Porsche, and Bugatti intends to spend $34 billion by 2024 to make a hybrid or electric version of every car in its lineup.
The brand intends to launch about 70 new models by 2028 and wants 40% of all cars it sells to be electric by 2030.
The expected figure of 14 million is based on Volkswagen’s current and expected capacity. This represents a 27% share of the market. However, the company has been facing issues with some of its battery providers that include the likes of Ganfeng and LG Chem.
This is why Volkswagen recently announced plans to produce its own parts including batteries. These initiatives are quite expensive but they will help VG meet aggressive emission targets and stay out of legal and supplier issues.