Volkswagen’s Tremendous Transformation to Electric Vehicles — Some Context & Commentary

As you well know, Volkswagen got its shoes knocked off last year when researchers in West Virginia discovered that Volkswagen had been massively cheating diesel emissions tests.  The company has repeatedly indicated that it would shift its focus to electric vehicles in the wake of the scandal, but it’s been hard to gauge how seriously Volkswagen aims to do so.  However, for anyone in leadership connecting the dots, the diesel scandal actually provides the company with the perfect opportunity to make a quick shift that other automakers are practically imprisoned from making.

As discussed ... most recently here, conventional automakers are stuck between a huge rock and a very hard place.  If they transition to electric vehicles very quickly, they lose expected revenue from massive investments in manufacturing facilities, IP, personnel, etc. (related to internal-combustion-engine cars).  This would not make stockholders happy, and it would put a lot of the top staff out of business.  However, if they don’t transition to electric vehicles quickly, and the market does (via companies like Tesla Motors, Faraday Future, Apple, Google, Atieva, etc.), the get absolutely wrecked and have to ask their governments to bail them out.

The situation with Volkswagen, of course, is that it is expected to massively overhaul its focus in the wake of the diesel emissions scandal.  You could say it is forced to make the EV switch sooner than others, or you could day such a move still takes a bit of foresight and courage.  I’d like to be a fly on the wall in Volkswagen board meetings before making a call on this one. Either way, though, this is what Volkswagen seems intent on doing.

In the end, it may make Volkswagen the best-equipped company to lead the EV revolution … ironically.

As I’ve written many times before, two (of five) huge competitive advantages Tesla Motors has right now are basically just about making electric cars absolutely, without any doubt better than gas cars — cheaper batteries, and Supercharging for road trips.  It recently slipped that Volkswagen is following Tesla’s lead and plans to build a $11 billion battery factory in Germany (a good way to save the jobs it will likely drop from a move away from gas/diesel cars), and the company has also announced in the past years that its future long-range electric vehicles will be able to utilize super-fast charging (150 kW and up), even though there’s still no public word or hint about a legitimate network of super-fast charging stations.  Though, I wouldn’t put it past Volkswagen at this point.  It seems Volkswagen may be the first major automaker to be fully transformed by Tesla’s Secret Master Plan.

Naturally, I’m not calling this a shoe-in.  Volkswagen has as monumental a task going forward as Tesla has — even more so.  It faces some big stockholder and reorganization challenges, but shareholders in automakers such as Daimler and BMW have been repeatedly asking their executives what their response to the Tesla Model 3 is, so let’s hope the investment community as a whole gets the picture soon that this is Volkswagen’s best move forward.

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