Expect VW (OTCMKT:VLKAY) to Be the Most Profitable Maker of Electric Cars
$VLKAY, $F, $GM, $TSLA
Friday, Volkswagen (OTCMKT:VLKAY) CEO Herbert Diess said he expected the multi-brand car-making group to be the most profitable manufacturer of EVs (electric cars) thanks to economies of scale.
Even 1st generation vehicles, which start rolling off production lines next year, are expected to make a positive contribution to Volkswagen Group’s automotive margin, CEO Diess said.
CEO Diess said the management board would make a strategic decision about the future of its autonomous driving program in Q-1 of next year.
Ford (NYSE:F) and Volkwagen are in talks about potential cooperation in several areas, including on how to share the cost of developing autonomous cars, CEO Diess said.
The automotive giants are coming out to slay Tesla.
The Volkswagen ID line is set to debut in Y 2020, and the Audi E-Tron should hit US showrooms this coming Spring. Other Volkswagen brands, including Porsche, are planning their own electric models.
Then comes FoMoCo
Ford (NYSE:F) has committed to spend $11-B to refocus the company on new products such as self-driving and electric vehicles. GM is gearing up its plans and plants too.
Tesla says it is not concerned about the increased competition because it will help its overall goal of transitioning cars globally from gasoline and diesel to electric.
“Every compelling electric vehicle on the road is a win for Tesla,” a company spokesman said.
The Volkswagens, Fords and General Motors of the world come with size and long track records of building cars.
“One area where they have a bit of an advantage is the ability to work with their supply chain to get high quality components, and a supply of raw materials such as lithium and cobalt,” he said. “They … already have factories in place around the world.”
The deep pockets of established automakers also gives them a huge advantage over Tesla, as the far larger and richer established automakers have resources that Tesla cannot touch.
The biggest barrier to the established automakers making a major push into EVs could be that they might not be as profitable for the automakers’ dealers.
Most car dealers make little or no profit on selling new cars, the profit on used car sales and warranty service. The presumption among dealers is that EVs will not require as much service, plus the collective wisdom is that most buyers will not want a used EV.
Have a terrific weekend.