In the U.S Tesla dominates the conversation around electric vehicles, as consumers instinctively associate the brand, and Elon Musk's eccentric, visionary person with the push to go electric. But in Europe, it's a different story. While Tesla's Model 3 has been selling quite well in the region, it's not nearly enough to knock the sales.
Volkswagen has been the dominant automaker in Europe for many years:
Germany-based Volkswagen Group out of its top spot in the European EV market, where it's garnered about 26% market share in the first half of 2021. Volkswagen's ambitions for electric vehicles are global, and they're ambitious. They really want to go all in on EVs. And they are, like everyone else, gunning for Tesla. The Volkswagen Group, which includes many different brands, such as Audi, Bentley and Porsche, has an edge in Europe thanks to its local manufacturing, brand familiarity and cheaper price points. Not to mention Europe's tightening vehicle emissions standards and steep noncompliance fines, which pushed VW to go electric as the company sought to rehab its image in the wake of the 2015 diesel emissions scandal VW has no choice but to fully, aggressively pursue this strategy in Europe. Tesla's Berlin Gigafactory hasn't gotten up and running yet, so it's really a timing issue. VW just started selling cars more aggressively in Europe than China and the U.S. Whether it can replicate this success in other markets remains to be seen, as Volkswagen still has many models under development. They've got a lot of vehicles coming, and it takes time to get people to understand that it's there, and be aware of it and want to consider it. You know, it's not necessarily that someone will not consider an electric vehicle that's not from Tesla. It's in some cases, they don't even know it's there.
The dark time of VW:
In 2015, Volkswagen was caught cheating on American air pollution tests, programming their diesel vehicles to activate emissions controls only when emissions testing was in progress. But when the cars were operating regularly, they emitted 10 to 40 times the legal amount. Dieselgate kind of really propelled them to try to find a different way to power their vehicles. They really had to change their image. After the scandal, the Volkswagen Group replaced their CEO multiple times. But when Herbert Diess took the reins in 2018, he steered the company towards electrification.It's kind of turned into a blessing in disguise, because now the company has aggressively pushed a full electric strategy.
The turning point for VW:
Diess has been spending about $68 billion by 2024 on electric cars and digital technologies. By 2029, Volkswagen says that it will build 26 million EVs and will offer 50 different fully electric models by 2030. Adding everything up, very emotional vehicles, high economies of scale. I think we will be the most profitable company in electric vehicles. Here at the Transparent Factory in Dresden, Germany, Volkswagen produces a limited volume of the ID.3, its top selling EV in Europe. This compact car is mass produced at VW's Zwickau plant, which is now solely focused on EVs, having made its last combustion engine vehicle in June 2020.From my point of view, electric mobility has won the race. And considering the high volumes we are targeting, I think the customer will also benefit from the economies of scale, decreasing prices.
In September 2020, VW also unveiled the ID.4, an SUV aimed at the global market that has become Volkswagen's top-selling EV globally. While the ID.3 is not sold in the U.S., the ID.4 is. It will be produced at Volkswagen's Tennessee plant beginning in 2022 and production is already underway in Europe and China. But as Volkswagen ramps up production of all of its EV brands, it's got a ways to go before it catches up with Tesla globally. In the first three quarters of 2021, Tesla sold over 627,000 EVs, while Volkswagen sold about 293,000. Volkswagen knows that it can't necessarily become another Tesla. No one can necessarily become another Tesla, even some of the EV startups. Tesla had the EV market essentially to itself for a decade, which is why their market share is so high, which is why they have the following that they do.
But as automakers like Volkswagen fully commit to electrification, analysts say that Tesla's dominance is sure to wane. In a growth market like EVs, it's nearly impossible for a company like Tesla to maintain its majority market share.
And nowhere is that more clear right now than in the European market. In 2020, strict vehicle emission standards went into effect in Europe. This resulted in traditional automakers bringing a suite of new fully electric and hybrid vehicles to market, and Volkswagen surged past Tesla to become the region's EV leader.The regulations in Europe also require huge fines if you miss your compliance. And that's a particularly effective motivator for some of this change. So far this year, about 72% of the Volkswagen Group's EV sales have been in Europe.
Current developments of VW:
Currently, it has 25 different all-electric models on the market. And historically, some of its most popular EVs, like the e-Golf and e-Up have been tailored for Europe, with shorter ranges but cheaper price point than Tesla in Europe, you have shorter commutes, you don't need as big of a battery range. So therefore you don't need these large cars. You can get much smaller EVs. The introduction of the ID series though, has given Tesla a run for its money in the region. The base model of the ID.3, for example, gets about 265 miles per charge, nearly identical to the standard Model 3. And it still costs at least $5,600 less, depending on the country. That price differential is largely due to the fact that Tesla is not yet producing vehicles in Europe, and therefore has to pay transport fees and import taxes on its cars. That should change soon though, as Musk aims to start production at Tesla's Berlin Gigafactory by year's end, and ramp up the volume throughout next year. But just like Tesla in the U.S., VW has an important head start in the region, along with deep brand familiarity.
Conclusion:
They have a history there, much like the Detroit automakers do in the Midwest, Volkswagen has for all of Germany, if not close to all of Europe. Out of all of Volkswagen's vehicle sales in Europe this year, 7.9% have been all-electric vehicles. That's nearly double last year's percentage. But by 2030, Volkswagen says that 70% of its vehicle sales in Europe will be EVs.This is a VW shift that is intended to be deep and thorough, and it's going to take some time to get there. What happens in the next three years in terms of who's selling more than somebody else is important. But really, it's going to be 10 years before we have a really good sense of what's happening.This is how VW is dominating the European market.
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