The race to dominate the electric vehicle industry may be tighter as Volkswagen, Germany’s auto giant and looming rival Tesla, revealed plans on Monday to reduce battery costs and operate an extensive charging network.
Much-loved “Battery Day”, the German group which owns the Volkswagen, Audi and Porsche brands said it will rely on six gigafactories in Europe to secure supplies as the industry faces looming shortages.
Shares in the Volkswagen Group
SWEAR,
+ 3.55%
VWAGY,
+ 7.17%
VWAPY,
+ 2.93%
surged about 3% on Monday as the company’s top executives outlined a road map for technology expansion.
Electric vehicles have become the company’s “core business” in Wolfsburg, Germany, said Herbert Diess, chairman of the group’s management board, and his new plans come as the battle for domination of the fast-growing electric vehicle space heats up.
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According to analysts at UBS, EVs could achieve 100% penetration of the auto market by 2040. Over the next few years, Swiss banks project that Volkswagen and Tesla will emerge as market leaders, with German companies expected to catch up with Tesla. in terms of the total volume of electric vehicles sold next year.
Volkswagen eliminated Tesla from its top ranking in the European EV market in 2020 and now has a 20% to 25% market share in this key region. Europe is the second largest electric vehicle market in the world after China, which is home to domestic EV manufacturers including Nio
NIO,
-1.25%,
XPeng
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+ 0.63%
and WORLD
1211,
-2.88%.
As auto companies scramble to pivot across sectors for electric mobility, UBS said it expects that the supply of battery cells needed to meet demand will face “regional tightness this year and global shortages by 2025.”
To secure the batteries needed for expansion, Volkswagen said it would rely on six gigafactors by 2030. The first plants will be in the Swedish cities of Salzgitter and Skellefteå, where Volkswagen is building a plant with partner Northvolt.
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Northvolt said on Monday that it had received a $ 14 billion order from Volkswagen for premium battery cells. The German group also increased its stake in the Swedish company, which was founded by former Tesla employees with supporters including Goldman Sachs.
GS,
-0.79%
and Spotify
POINT,
+ 1.99%
Chief Executive Daniel Ek.
In addition, Volkswagen said it would seek to lower its battery costs – a key factor in lowering total vehicle costs – by up to 50% over the next decade.
Cost savings of some form will be seen from 2023 onwards, Volkswagen said, as the group plans to launch a new integrated battery cell that will be installed in 80% of its electric vehicles by 2030.
“We aim to reduce the cost and complexity of a battery and at the same time increase its range and performance,” said Thomas Schmall, Volkswagen technology board member and head of its technology roadmap. “This will ultimately make e-mobility affordable and become the dominant driving technology.”
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To support broad consumer adoption of electric vehicles, Volkswagen plans to increase its European vehicle charging network fivefold by 2025. In the next few years, the company aims to operate 18,000 public fast charging points, including 8,000 in partnership with major oil company BP.
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-2.26%.
Volkswagen will build 3,500 more charging points in North America by the end of 2021 through its US 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 “giants” like Volkswagen “are slowly getting up and starting to show that size matters in terms of the future of electricity [that] the rules forced their entry. ”
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European carmakers are being pushed to produce more electric vehicles under threat of hundreds of millions of euros in fines from the European Union over binding fleet emissions targets.
The race towards electric mobility is also supported on the demand side, with many European governments offering thousands of dollars in tax breaks and subsidies for consumers to choose electric vehicles.
“VW announced a large cost advantage from increased production, deciding to integrate vertically in helping to cut BEV costs towards a price balance, which is critical after subsidy scaffolding is slowly being removed,” said Schmidt, who is also the publisher. European Electric Car Report.
