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Evaluation Volkswagen receives actuality test after Tesla's milestone week

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© Reuters. FILE PHOTO: The Tesla automaker logo can be seen at a car dealership in London, United Kingdom on May 14, 2021. REUTERS / Matthew Childs / File Photo

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By Christoph Steitz

FRANKFURT (Reuters) – It was a sobering week for Herbert Diess & # 39; E-car ambitions.

While Tesla (NASDAQ 🙂 joined the trillion dollar club, received a groundbreaking contract from Hertz and set a new sales record in Europe, the head of Volkswagen (DE 🙂 presented a cut in sales and delivery prospects and a decline in quarterly earnings, That led to a point at home: The dethroning of Elon Musk as the king of electric vehicles (EV) has become much more difficult.

"Tesla's recent achievements send a clear message," said Diess analysts during a call on Thursday's third quarter results, which mainly focused on Tesla.

"We have to prepare for a new phase of the competition."

Diess, a longtime admirer of Musk, stepped up the pressure this year and outlined plans – including building six major battery factories in Europe – with the goal of overtaking U.S. rival VW as the world's leading electric vehicle seller by 2025.

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

And since Tesla is worth almost eight times as much as VW while it only sells 5% of the cars, and its Model 3 is the first ever EV to top monthly sales in Europe, this stage is more about keeping up not to catch up.

"They gape in terms of their growth margins. They appear to have structurally better access to chips. They appear to have structurally better access to batteries," Patrick Hummel, head of European and US Auto & Mobility Research at UBS, said during the Telephone call with Diess.

To make matters worse, Musk will soon start producing cars in Tesla's state-of-the-art plant in Grünheide near Berlin and lead the battle for global auto dominance to Germany, where some of the first automobiles were invented.

Diess, 63, who led the automaker out of its Dieselgate emissions fraud scandal, said this will force local heavyweights to step up their game significantly so as not to fall further behind.

"Tesla Grünheide is definitely a new reference for us that sets new standards in terms of speed, productivity, but also lean management, and we have to be prepared for that," he said in a conversation with reporters.

KEEP YOUR FRIENDS CLOSE, BUT YOUR ENEMIES CLOSE

Diess, who received an offer to lead Tesla years ago, has repeatedly highlighted Musk's success with the EV pioneer, who disrupted the auto industry's established paths and whose $ 1 trillion valuation dwarfs that of Volkswagen.

Though Volkswagen stock is up 28% so far this year, its current valuation of around 121 billion euros ($ 141 billion) is a far cry from the 200 billion Diess believes the company the luxury brands become Belonging to Porsche and Audi is worth it.

Diess, who became CEO of Volkswagen in 2018, even invited Musk for a chat with his managers this month.

A central component of this advance will be Volkswagen's Trinity project, in which the carmaker wants to build an EV flagship sedan at the Wolfsburg plant from 2025/26 and make the plant a challenger for Tesla's Grünheide site.

This plan aims to cut the time it takes to assemble electric vehicles to around 10 hours, Volkswagen CFO Arno Antlitz told Reuters for about as long as it takes Tesla to build its Model 3.

It is also clear that this will result in fewer jobs, with the risk of protracted and painful battles with employee representatives who have traditionally held significant power at the world's second largest automaker.

“We have to prepare the production for a significantly lower amount of work in some lines. We have to adjust to less complexity, more speed, line speed, ”said Diess.

Earlier this week, Volkswagen's new head of labor held Diess responsible for focusing too much on investors and not investing enough in the workforce.

CFO Antlitz said that while both management and workers agree that Wolfsburg needs to be overhauled, he admitted that finding common ground could be difficult.

"Of course, as always, the question 'How do we get there' arises, but I am convinced that we share the same vision with the works council."

A spokesman for Diess referred to the request for comment on his statements on Thursday. Tesla spokespersons in Germany were not immediately available for comment.

($ 1 = 0.8579 euros)

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