Volkswagen is stepping up electric car production to compete with Tesla, aiming to produce roughly 1 million electric vehicles by 2022, according to Reuters. Production will be concentrated at two factories in China, with a combined production capacity of 600,000 vehicles.
Tesla is building its own new plant in Shanghai, as part of an effort to boost production to 500,000 vehicles a year. However, the move by Volkswagen suggests that established automakers may be able to surpass Tesla, relying on existing infrastructure, an established workforce, and profits from conventional, non-electric vehicles.
Volkswagen appears to be catching up to companies that were offering electric cars much earlier, including BMW, Renault SA, and General Motors, in addition to Tesla.
Bernstein Research analyst Max Warburton told Reuters:
“The truth is barriers to entry in autos remain high. Making cars is hard. The move to electric vehicles will be expensive, but will probably be led by traditional manufacturers.”
And Volkswagen is taking things one step further, taking a chance on dedicated electric vehicle architecture, to drive down prices with savings from economies of scale. The company is retooling eight plants to focus on electric cars with a dedicated platform, called MEB. They’re aiming to reach prices as low as €20,000 for some electric cars.
In addition to the two factories in China, two German factories, in Hanover and Zwickau, will also be converted for electric car production. Volkswagen is also hoping to license the MEB platform to competitors such as Ford, company officials told Reuters.
The move toward electric vehicles will be funded in part by increased sales of conventional SUVs, with the company hoping they’ll make up 40 percent of overall sales by 2020, up from 23 percent last year.
The company says it will be set to produce 22 million electric vehicles by 2028, 11.6 million of which could come from the factories in China.
Tesla has failed to meet its own production targets in recent years, stoking skepticism from investors on growth that isn’t accompanied by profits, and on new entrants into the auto market in general. Tesla is now hoping to reach the 500,000-car target it had originally set for 2018, by mid-2020.
Analysts have predicted that while Volkswagen is on its way to become the top manufacturer of electric vehicles by 2025, Tesla will continue to hold its limited, niche role in the market.
Photo by Wolfmann [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]