The car giant is plotting to overthrow Elon Musk

Tesla Inc., the pioneer and pacesetter, has dominated the dawn of the new-energy era, capturing investor imaginations with a vision of what the next generation of vehicles look like and on the nascent market for fully electric cars. are occupying.

In the other corner are the massive giants: Volkswagen AG and Toyota Motor Corp. The world’s two largest automakers – each sold about 10 or 11 cars each Elon Musk Did last year – realizing the age of the battery-powered vehicle is here and gaming is how to stay on top.

Within five days of each other last month, these masters of mass production planned to spend $170 billion in the coming years to keep their claim on an industry they’ve dominated for decades .

The executives at the top of these incumbents are acutely aware that the transition from the internal combustion engine will not be systematic. It can get ugly – something similar to when Apple Inc. entered the mobile phone market and overtook the once-dominant Nokia Oyze.

After a year of extraordinary growth, during which Tesla became the most valuable automaker of all time, the trillion-dollar question is whether Musk’s profits will be passing into the next generation of carmaking, as evidenced by his company’s market capitalization. It shows.

“When the world’s two biggest car companies decide to go electric, there’s no question of speculation – the mainstream is going electric,” said Andy Palmer, former Aston Martin head and former head of Nissan Motor. The company executive is often referred to as the “godfather of EVs” after being instrumental in developing the Japanese carmaker’s battery-powered Leaf. “I expect the transition to electric to be faster than everyone expected.”

The way VW and Toyota have gone ahead to defend their land is as different as one might expect from the proud German and Japanese giants of the industry. One is coming out swinging, putting Tesla in its sights, and the other investing heavily in EVs, while continuing to spread its bets, taking time off as the revolution begins.

The furious slugging behemoth to counter Musk is VW, which over 84 years has grown into a stable of a dozen brands, manufacturing in nearly 120 locations worldwide and employing more people than Detroit’s population. The VW Group produces models ranging from the Tiguan and Passat to Lamborghini supercars and Scania heavy trucks.

Every year that Chief Executive Officer Herbert Diess has been at the helm, VW announces an unprecedented budget for electrification. On 9 December, they delivered their biggest ever plan, allocating 89 billion euros ($100 billion) for EV and software development over the next half-decade.

Dias constantly uses Musk as a measuring stick, so much so that he admits that there are some upsets within VW’s ranks. In October, he welcomed Musk as a surprise guest to an executive conference with 200 of the automaker’s top managers.

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 the ID.4 sport utility vehicle.

“Our transformation will be rapid,” Dias said during a Tesla-style battery event in March, “larger than anything the industry has seen in the past century.”

Ten months into 2021, VW had delivered about 322,000 fully electric vehicles, more than half of its 600,000 sales target. Analysts at Sanford C. Bernstein & Co. have estimated that VW will sell around 450,000 EVs for the year, which “isn’t the end of the world, but it’s also not a reason to celebrate.”

The body is smooth. ID.3 and ID.4 share composition will be based on a total of 27 EVs by the end of this year. VW will go from building these models at five factories in Germany, China and the Czech Republic to eight, starting production at two more facilities in its home country and one of its US assembly plants in Chattanooga, Tennessee.

VW has also seen solid results within the group with its higher-priced EV models. For example, the Taycan is set to sell the iconic 911 sports car. With more electric Porsches on the way, the brand is expected to introduce a fully electric version of its popular Macan SUV next year.

Toyota’s long-term position for the future was demonstrated a few months ago at a racetrack in the hills of western Japan. While the company brought its battery-powered bZ4X electric SUV, the car that Akio Toyoda took to take a walk around the circuit was a Corolla Sport H2 concept vehicle equipped with a hydrogen-fueled engine.

“Leading to the uncertainty, we need diverse solutions,” the grandson of the Toyota founder said during a news conference on November 13. “We don’t want to bind ourselves to just one choice.”

Diversity is one thing; Absence is another. The hybrid-powertrain trailblazer known for the Prius has admitted to being “a bit late” to a fully electric model—and that was four years ago. Toyota’s first mass-market global EV isn’t ready to debut until the middle of this year.

But weeks after the hot adoption in the hydrogen car, Toyoda traded its racing overalls for a suit and tie and gave outsiders an unprecedented look at a bevy of future products. When the first curtain was unveiled at a media briefing on a man-made island in Tokyo Bay, it had five EVs in front of it.

Toyoda gave a brief sales pitch for each vehicle, then raised its palms skyward before another curtain revealed 11 more battery-electric models. “Welcome to our showroom of the future,” he said while announcing plans to roll out 30 EVs by the end of the decade.

Of the 8 trillion yen ($70 billion) Toyota devoted to electrification over that period, half would go to fully electric models. The automaker aims to sell 3.5 million EVs annually by the end of the decade, nearly double the target set just seven months ago.

It took Toyota some time to reach this point. Some investors and environmental groups criticized the automaker for dragging its feet, with cautionary comments from executives running against the industry’s general enthusiasm for EVs. Last summer, Anders Schelde, chief investment officer at Danish pension firm Akademiker Pensions, which holds shares in Toyota, said he didn’t see management’s attitude toward EVs as a win-win strategy for the long term.

Schelde said his fund was starting to look more broadly at its investments to align with the goals of the Paris Agreement, which established a framework to limit global warming to below 2 degrees Celsius. “Toyota has two or three years to clean up its act,” he said in an interview.

This type of criticism was a pain point for Toyota, over time during top management meetings debating why its message around carbon neutrality was not being well received. Last month’s EV event in Tokyo was the latest in a flurry of festivities the company has organized around the world to convey its message of allegiance to hybrids and hope that hydrogen-powered cars will replace the carmaker’s years of research and investment has been achieved. Traction only with battery operated vehicles.

In Brussels in early December, the company vowed to be ready to sell only zero-emissions cars in Europe by 2035. Days later in North Carolina, it hosted the governor and hundreds of other guests at a news conference to announce the state would be home to its first US battery plant — a $1.29 billion investment.

While Toyota’s onslaught is to be taken seriously, with VW beginning the transition to electric with its EV push show flipping the switch won’t be a case.

And Tesla is doing some scaling of its own. As the company closed a year in which it delivered more than 936,000 vehicles – up nearly 90% – it raised 1.2 billion yuan ($188 million) to upgrade equipment and take production at its two-year-old Shanghai plant. Planned investment. Exceeds its declared capacity of 450,000 units a year. This would add another 4,000 workers to the facility, bringing the total to about 19,000.

Two new assembly plants — one outside Berlin and the other in Austin, Texas — are also gearing up to start making the Model Ys. And there is a great demand to meet this additional production. Wait times on the Model 3 and Y have exceeded six months, Tesla’s head of investor relations Martin Wicha told a recent Deutsche Bank conference.

“While market demand for EVs has clearly outpaced the industry’s production capacity, success in EVs is no longer about the order book, but about production efficiency, ability to secure supply and best cost, where Tesla thinks it has a great edge,” Deutsche Bank analyst Emmanuel Rosner said in a note.

Others see Tesla as a muscle of new entrants into a growing market, ousting Tesla from the electric-car throne. IHS Markit projects that Tesla’s EV market share in the US will drop to 20% by 2025, from a little over 50% today.

The “heavy investment” will put Toyota and Volkswagen in a better position to compete with EV specialists, said Anna-Marie Biesden, head of auto research at Fitch Solutions. “We have long believed that more traditional carmakers will have certain advantages over startups such as scale, manufacturing experience and brand loyalty.”

In addition to changing their assembly lines and model offerings, VW and Toyota will have to chase Tesla on another front: software.

Initial sales of the ID.3 were plagued by challenges VW faced getting some technical work to work. Early cars were delivered to customers with missing features, including the ability to link smartphone apps with the vehicle’s display screen. A fix for their owners to beam in the air instead of — the way Apple does with the iPhone, and Tesla does it with its models — by requiring ID3 drivers to pay a visit to their dealer to have their car serviced. Was.

Joy Mandel’s experience is an example of this. The music festival industry worker in the Woodland Hills neighborhood of Los Angeles was the first to receive the ID.4 electric SUV at his local dealership. It’s faced its fair share of bugs – audio cuts out from time to time, and other times the vehicle doesn’t free itself from its charging plug.

Overall though, Mandel says he’s still happy with his purchase. They didn’t have trouble getting to West Coast events thanks to VW’s “solidly built-out” charging network.

“It’s not Tesla in terms of technologies,” Mandel said, “but people think they’re afraid to make changes to EVs, Volkswagen keeps things like a normal car.”

This story has been published without modification in text from a wire agency feed. Only the title has been changed.