Volkswagen is betting to be the Samsung in the market where Tesla is the Apple

“Let me start with the obvious: electric mobility has won the race,” said Herbert Diess, CEO of Volkswagen Group, on Monday. It is the only way to quickly eliminate mobility pollution. Diess was giving a speech at a Volkswagen event which was dubbed as ‘Power Day’, in which the company announced its plans for beating and taking the place of the world’s largest maker of electric vehicles, Tesla Incorporation. The majority of the time of the event was spent talking about the latest topic of Electric Vehicles and the lithium-ion battery.
The reason behind giving much attention to the batteries is that it constitutes as much as 30% of the cost of an electric car. And as every automobile maker looks forward to pivoting to EVs, it is not about providing the cheapest price for batteries but improving the securing supply to meet the ambitions of the customers. However, the cost of the pivot towards EVs won’t be cheap. Six battery factories would be made across Europe by 2030, announced Volkswagen and it would cost around $29 billion, according to BloombergNEF. The company is also investing in recycling precious metals and in improving its battery design.
Nonetheless, it will be difficult for the world’s largest automobile maker to defeat Elon Musk. Ben Kallo, an analyst at Robert W. Baird wrote in a report that Tesla will likely retain its broad EV leadership. He left Volkswagen’s hour-long presentation thinking that the Model 3 maker had the upper hand when it came to batteries.
An electric vehicle expert and a professor at the University of Carnegie Mellon, Venkat Viswanathan thinks that the Tesla drivetrains are ahead of the competition by about four to five years and it comprises both electric motors and batteries. He said that Tesla provides its customers with the highest range of driving with the same capacity of the battery.
Volkswagen’s aspirations get high marks from Baird’s Kallo, but he’s not sure Musk can relinquish control. Kallo wrote that we see Volkswagen as a potential leader in the non-Tesla EV market. A non-Tesla electric vehicle ecosystem will emerge, similar to the Android smartphone ecosystem.
An ecosystem has been made by the Apple Incorporation which combines hardware advancements such as camera sensors and processor chips with software lock-ins such as the App Store and the iPhone operating system. Apple has stuck to its patented lightning charging cable, which may have frustrated some users. Tesla has done something similar with electric vehicles, designing its own battery chemistry, electric motors, and driver assistance system. It has also made a network of supercharging that vehicles other than Tesla’s vehicles cannot use yet. Apple became the world’s most valuable company by creating a dominant brand and ecosystem for which customers are ready to pay much more. Samsung Electronics Corporation and Google’s Android operating system managed to carve out a substantial share of the global smartphone market.
On Monday, Baird’s Kallo reached a conclusion that is similar to the analyst of the United Bank of Switzerland group, Patrick Hummel and his team after they completed a Volkswagen’s ID.3 teardown. Earlier this month, he also said that Volkswagen can be the Samsung of the Electric Vehicle world but cannot be the Apple.
Volkswagen may have an advantage over Tesla in one region, just as Samsung has an advantage over Apple with its superior smartphone display. Next-generation lithium-ion batteries are a major gamble for the German automaker.
Volkswagen invested in QuantumScape Corporation, a Silicon Valley startup, that was developing solid-state batteries that aimed to increase driving range by up to 50% and minimize charging time to 15 minutes. Despite the fact that QuantumScape’s battery won’t be in a vehicle until 2025, the company’s market value is around $23 billion—roughly a sixth of Volkswagen’s.
The two companies are now in parallel lanes on batteries, just as they are in the overall strategy.
Tesla announced plans last year to cut the cost of battery cells by 56% through an efficiency push and a series of technological improvements. Volkswagen said Monday that by creating a one-size-fits-all format for most use cases, it can cut cell costs by half.
James Frith, the Bloomberg NEF’s head of energy storage said that they’ve both decided on a cell format that they’d like to mass produce in order to reduce costs. It’s difficult to tell if one is more offensive than the other.