Titans of carmaking are plotting to overthrow Tesla’s Elon Musk

 

Bloomberg

The epic fight over who controls the future of the car industry is about to get a whole lot more interesting. Tesla Inc, the pioneer and pacesetter, has dominated the early rounds of the new-energy age, capturing investors’ imaginations with a vision for what the next generation of vehicles looks like and seizing the nascent market for fully electric cars.
In the other corner are giants of scale: Volkswagen AG and Toyota Motor Corp. The world’s two biggest automakers — each sold roughly 10 or 11 cars for every one Elon Musk did last year — realise the age of the battery-powered vehicle is here and are gaming out how to stay on top.
These masters of mass production laid out plans to splurge $170 billion over the coming years to preserve their claim on an industry they’ve dominated for decades.
Executives at the very top of these incumbents are acutely aware the transition from the internal combustion engine won’t be orderly. It could get ugly — something akin to when Apple Inc. entered the mobile phone market and outclassed once-dominant Nokia Oyj.
After a year of standout growth during which Tesla became far and away the most valuable automaker ever, the trillion-dollar question is whether Musk’s advantages heading into the next generation of carmaking are as insurmountable as his company’s market capitalisation suggests.
The ways VW and Toyota have moved to defend their ground are as different as one would expect from proud German and Japanese titans of industry. One is coming out swinging, putting Tesla squarely in its sights, and the other is investing heavily in EVs while continuing to spread its bets, biding time as the early stages of the revolution shake out.
The behemoth doing the furious slugging to take on Musk is VW, which has grown over 84 years into a stable of a dozen brands, manufacturing in some 120 locations around the world and employing more people than the population of Detroit. VW Group generates roughly $280 billion a year churning out models ranging from the Tiguan and Passat bearing its namesake badge, to Lamborghini supercars and Scania heavy trucks.
Every year that Chief Executive Officer Herbert Diess has been at the helm, VW has announced unrivaled budgets for electrification. On December 9, he delivered his largest plan yet, allocating $100 billion to EV and software development over the next half decade.
VW’s initial foray into EVs was with luxury models such as the Audi e-tron and Porsche Taycan. Last year, it sought to make a splash with more mainstream offerings — the ID.3 hatchback and ID.4 sport utility vehicle.
The ways VW and Toyota have moved to defend their ground are as different as one would expect from proud German and Japanese titans of industry. One is coming out swinging, putting Tesla squarely in its sights, and the other is investing heavily in EVs Ten months into 2021, VW had delivered around 322,000 fully electric vehicles, just over half of its 600,000 sales goal. Sanford C. Bernstein & Co. analysts have assumed VW would sell around 450,000 EVs for the year, which “isn’t the end of the world, but it’s also not quite a reason to celebrate.”
VW has also seen solid results with its high-value EV models within the group. The Taycan, for instance, is poised to outsell the iconic 911 sports car. More electric Porsches are on the way, with the brand expected to introduce a fully electric version of its popular Macan SUV next year.
Toyota’s long-standing positioning for the future was on display a couple months ago at a racetrack in the hills of western Japan.
Of the $70 billion Toyota dedicates to electrification in that span, half will go to fully electric models. The automaker is aiming to sell 3.5 million EVs annually by the end of the decade, almost double a target set just seven months earlier.
While Toyota’s onslaught is to be taken seriously, the start VW has gotten off to with its EV push shows transitioning to electric won’t be a matter of flipping a switch.
And Tesla is doing some scaling of its own. As the company closed a year in which it delivered over 936,000 vehicles — up almost 90% — it plotted out an investment of as much as $188 million in its two-year-old Shanghai plant to upgrade equipment and take production beyond its stated capacity of 450,000 units a year.
It’ll add another 4,000 workers at the facility, bringing the total to about 19,000.
In addition to changing up their assembly lines and model offerings, VW and Toyota will have to chase Tesla on another front: software.
Last month’s EV event in Tokyo was the latest in a flurry of festivities the company has held around the globe to deliver its nuanced message of allegiance to hybrids and hope that the hydrogen-powered cars the carmaker has plowed years of research and investment into will gain traction alongside vehicles that run on just a battery.

Leave a Reply

Send this to a friend