Volkswagen is struggling with its ambitious goal to become the world’s largest seller of electric vehicles. The legacy auto giant is finding it cannot keep up with the breakneck innovation pace set by scrappy newcomers like Tesla and BYD. These nimble rivals are pulling further ahead with faster battery improvements, sleeker vehicles, and surprisingly affordable price tags that undercut even VW’s mass-market ID electric models.
While VW managed to sell around 217,000 battery-powered vehicles in the first six months of 2022, this marked a slight decline from 2021. Meanwhile, industry disruptor Tesla widened its lead, with sales growing 68% year-over-year to over 565,000 deliveries. Chinese giant BYD also proved formidable competition, more than doubling its new energy vehicle sales to around 270,000 units. With numbers like these, VW’s aim to double EV sales to 1.5 million this year looks like a daunting long shot.
Another issue plaguing VW is that its electric vehicles currently can’t match the range that sells. The ID range is limited to around 350 km or less per charge, while Tesla consistently offers over 500 km and BYD’s best models go an unprecedented 605 km between plug-ins. Who wants to stop charging when the competition offers an all-day driving range? VW will need to boost battery capacities considerably to convince wary drivers that going electric won’t mean range anxiety.
When it comes to pricing, VW also has its work cut out. The cheapest ID.3 starts at around $35,000, while a comparable BYD model lists for a jaw-dropping $22,000. Even the long-range Tesla Model 3 undercuts VW’s price despite unmatched performance. To truly bring EVs to the masses, VW will need to hack costs down to the bone through platform flexibility, battery innovations, and economies of scale. But that’s easier said than done in today’s inflationary environment…
One cost hurdle is VW’s MEB modular platform. Though efficient for high production volumes, it also standardizes cell formats in a way that’s not as conducive to quick battery improvements as some rivals’ more flexible approaches. VW has been slow to incorporate cheaper lithium iron phosphate (LFP) chemistry too, preferring the energy density of nickel-cobalt formulas. But with LFP gaining converts like Tesla fast, VW risks missing the mass market price points that LFP enables…
Apart from batteries, VW also faces a tech gap in software and interface experience that allowed Tesla such a head start. With over-the-air updates that constantly refine the ownership experience, Tesla sets a blistering pace of innovation that keeps customers engaged and loyal. VW is working hard to catch up, but change doesn’t happen overnight in a multinational bureaucracy versus a Silicon Valley startup model…
Inside VW boardrooms, challenges abound as leadership transitions. Incoming CEO Oliver Blume will have to navigate inflation, recession fears, and cost pressures like the Ukraine war while rapidly boosting EV capacity. Some argue VW still clings to old internal combustion ways. Going forward, sheer will may not be enough—VW will need to uncover creativity and flexibility if it is to lead the inevitable electric vehicle future. The race is on, but the competition is not waiting for anyone.
As VW falls further behind in the global dash to electric, the pressure is mounting. Some question if the engineering-led Wolfsburg giant can escape its bureaucratic DNA and truly match the outside-the-box thinking of EV trailblazers. Only a radical overhaul of strategies, from battery chemistries to software mindsets, seems capable of closing persistent innovation gaps.
Yet there are also signs VW is starting to aggressively push the envelope. In a sneak peek of models still under tight wraps, prototypes shown off suggest a slicker, more stylistically daring future lineup. Rumors of solids state battery pilot plants and bespoke high-performance platforms aim to stir passions notably muted in the ubiquitous ID series so far.
On the production front, VW is working double-time to streamline new “mega-factories” capable of spitting out EVs on a Tesla Gigafactory scale. Early efforts showed in efficient conversion of legacy combustion plants. Now plans for dedicated EV campuses promise even higher quality and lower costs if suppliers can smoothly dovetail into sophisticated new workflows.
In what may prove a seminal power move, VW is reportedly mulling plans to directly license out its MEB drivetrains and components in a bid for volume that rivals mass-producer alliances. The goal: leveraging engineering expertise far beyond own brand needs to build a global EV scale enough to slash battery costs below $100/kWh — the tipping point where electrics undercut gasoline models.
As models like the Microbus reboot and bespoke high-performance concepts fire shots across Tesla’s bows, VW is unbridling trademark brands to stake distinct niches. The aim: not just dominance by volume, but leadership across segments from micro-mobility to luxury. This should widen the appeal and show VW can shake off the “compliance car” stigma if battery capacity, range, and tech issues are decisively addressed.
Whether VW has the will to urgently transform is under the microscope as macro pressures intensify. Early reads on upcoming investor presentations will be watched for bold technology roadmaps and hard targets. If Blume can convince markets of a true EV-first vision, capital may flow to fund the fightback — but any signs of prevarication could be punishable in today’s unforgiving industry climate.
The good news for VW is the global market is large enough for multiple winners. Yet the bad news is dinosaurs may not survive the accelerating EV transition. With upstarts as hungry as ever and legacy auto in flux industry-wide, VW’s diversified portfolio and production clout won’t ensure survival without a revolution in strategy, culture, and competitive zeal to match its resources and reputation.
Blume must move rapidly to organize a laser focus on disruptive EV capabilities. This means empowering maverick skunkworks, cutting bureaucracy, consolidating battery purchasing pools, and pulling partners much tighter together across borders. VW’s federal structure suited the combustion age but may hamper the speed of decisions needed now.
Getting software and customer experience right will also be paramount. New markets like mobility services and 3D-printed micro factories point to futuristic chances, but VW must stay on the bleeding edge of today’s battery and interface innovations to connect with drivers now buying their first EV — and help displace the gasoline mindset for good as charging networks multiply.
For VW, it’s either evolve or perish. Legacies elsewhere are stumbling as EV demand outstrips supply. Blume faces board pressure like never before to prove VW can sustain global #1 status, even if the industry itself looks unrecognizable in a decade. He must act now to secure the funding and autonomy required for that make-or-break transition. The clock is ticking, and competitors are speeding up their electric strikes with every passing month.
