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Electric car companies: VW threatens Tesla in race to become top EV producer

12:00, 29 June 2022

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  • TSLA
    Tesla
    275.15 USD
    -13.44 -4.660%
  • VOW3
    Volkswagen
    140.35 USD
    -6.4 -4.350%

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A image of Elon Musk (L), chief of pioneering electric car maker Tesla and the CEO of German carmaker Volkswagen Herbert Diess.
Electric car companies, VW and Tesla are ready for EV war - Photo: Getty Images.

It’s become a heated race: Volkswagen (VOW3) is threatening Tesla (TSLA) dominance, hoping to take the top spot and become the number one Electric Vehicles (EVs) producer in Europe.

Among the world's electric car companies, TSLA is currently in the lead but VW is is not far behind. Research from Bloomberg Intelligence (BI) shows that Tesla will keep the EV crown for at least another 18 months, but that the automaker will struggle to sell a meaningful share of EVs in 2022 and 2023 and the throne could soon be usurped - by VW.

“It’s an EV arms race. Tesla has a bullseye on its back — the whole auto industry is gunning for it,” said Wedbush Securities analyst Dan Ives in a note.

Tesla (TSLA) share price

The BI report states: “Profit incentive to catch up with Tesla is lacking for most traditional marques in the short term amid rising battery costs and a lack of scale, except for Volkswagen. The German automaker is on track to overtake Tesla’s EV volume in 2024.”

But can VW overtake the mighty Tesla? The VW share price is down 28% this year and battery prices remain critical to cost competitiveness within the EV market. So, will VW have enough charge to win?

 

Capital.com Chief Market Strategist David Jones said: 2021 was a tough year for the car sector, with the global chip shortage meaning that many have had to drastically cut back vehicle production. This goes some way of explaining VW's poor performance in the second half of 2021.

VW has also recognised that the competition among electric car companies is strong. This month, VW CEO Herbert Diess spoke at the CAR Symposium conference in Germany and said that Elon Musk is “moving very fast, very focused and is twice as fast as the rest of the industry.”

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Volkswagen (VOW3) share price

Despite TSLA’s strength, VOW3 appears to be heading for the top spot on the podium and is slowly gaining ground on the leader board. The group is on track to launch an IPO of its Porsche brand in the fourth quarter. 

Maintain momentum

With that said, analysts also believe Tesla’s current momentum and dominance among the electric car companies may not be sustainable.

Giles Coghlan, chief analyst at HYCM told Capital.com: “First movers in a market are not always those who last. Over the years, it is undeniable that Tesla's brand power has been very strong, and this has allowed it to power ahead of its competitors. However, as traditional car manufacturers, all of whom have comparable name recognition, increasingly join the EV market, this begs the question – will Tesla's dominance remain?”

Hyundai (HYMTF) share price 

Coghlan stresses that investors would do well to watch Hyundai (HYMTF) and Kia (KIMTF), which are steadily dominating the wider EV race, after successfully launching the Kia EV6, which has enjoyed strong acclaim.

While Tesla may sell far more electric cars at the moment, this feat has taken the company ten years to bring as many EVs to market as Hyundai and Kia have in a matter of months. In the year through May, Hyundai and Kia have sold 21,467 of these EV models in the US, meaning that it has even outsold the ever-popular Ford Mustang Mach-E,” Coghlan said.

“Tesla may have moved first, but will that lead last or fade? Behind Hyundai and Kia’s success is an affordable price-point, and this is ultimately the key to capturing the market and buyers with lower budgets. In short, this could take EVs into the mainstream," Coghlan added. 

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