German automakers might catch up with Tesla—but they have a mighty long way to go
German automakers and their fans are fond of talking smack about Tesla. Volkswagen Group CEO Herbert Diess famously said in January 2020 that he and his company were “pretty optimistic that we can still keep up with Tesla and probably overtake them at some point.”
Above: A look at the popular Porsche Taycan and Tesla Model 3 (Unsplash: Roberto H)
Make no mistake, the Volkswagen Group, which includes Porsche, Audi and Skoda, has made tremendous progress over the past couple of years, and is currently by far the most electrified of the legacy automakers. Furthermore, last year the Group sold more EVs than Tesla in its home market of Europe (although Tesla sold more globally). If any of the legacy automakers can “catch” that disruptive little devil, it will surely be VW.
However, Tesla isn’t just a moving target—it’s an accelerating target. The more cars it sells, and the higher its stock soars, the more money it has to plow into more production and to open up new markets. Furthermore, the capricious carmaker is an idea factory that’s continually coming up with new manufacturing innovations that enable it to build cars faster and more cheaply.
Catching up to an accelerating target requires not just moving faster, but accelerating at a faster rate. Alex Voigt, writing in the Fully Charged blog, presents an extremely detailed argument, complete with numerous graphs, for why VW et al won’t catch up with Tesla any time soon. We’ll present a brief summary of his thesis here, but if you have any kind of financial stake in the industry, you should read his closely-reasoned article in its entirety.
Diess’s optimistic prediction is a version of one that auto industry observers have been making since Tesla’s founding: once Big Auto finally gets serious about electrification, its massive resources will allow it to bury tiny Tesla. Voigt argues that this assumption is based on linear thinking, and claims that the data tells a different story from the one that industry spokespersons and many traditional auto analysts have been presenting.
Reasonable minds may disagree about how long it will take VW and other legacy brands to make EVs the majority of their sales, but a look at their EV shares from 2021 makes it plain that they have a long way to go.
Above: Porsche's CEO, Oliver Blume, discusses the roadmap ahead for their brand as they begin to electrify their fleet (YouTube: CNBC Television)
So far, the legacy brand that’s had the most success selling EVs is Porsche. The luxury automaker was one of the few that actually increased total auto sales in 2021 (most others showed major drops in sales). The terrific Taycan saw its sales double in 2021, and is now outselling the iconic 911. Thanks to the Taycan’s success, Porsche reached an EV share (the proportion of EVs to total sales) of 13.7% in 2021, by far the highest among German brands. A new electric Macan, which is expected to arrive in 2023, could bring even more Porsche drivers into the electric world.
This is all wonderful news, but Porsche is, and will remain, a niche luxury brand that sells vehicles in the hundreds of thousands (300,000 worldwide in 2021), not in the millions. And the larger German brands are selling far lower relative numbers of EVs. The Volkswagen Group as a whole achieved an EV share of only around 5% in 2021, and electrification laggards Daimler and BMW each reached approximately 4%.
Total EV sales for all the German automakers combined were only 66% of Tesla’s sales in 2021.
Not only are the Volkswagen Group and its compatriots not catching up to Tesla in terms of EV sales, it may be all they can do not to fall further behind once the new Gigafactories in Berlin and Austin start ramping up production. Mr. Voigt expects Tesla to sell between 1.6 and 1.8 million vehicles this year, and he expects the Volkswagen brand (the Group’s highest-volume brand) to sell around 500,000 EVs. Even if VW doubles its EV sales, the gap between it and Tesla will widen.
What would it take for the Germans to keep up with Tesla in 2022? According to Mr. Voigt’s calculations, the Volkswagen brand would have to increase its EV sales by 250% to maintain the current gap. That doesn’t mean “catching up,” it just means remaining the same distance behind.
Actually closing the gap will mean adding some serious EV production capacity. That will happen, but it will take years, and it’s doubtful that companies will meet the ambitious electrification goals they’ve set. Herbert Diess himself has said, “If we own, here in Europe, about 20 percent market share, for that 20 percent market share to maintain 50 percent EVs, we need six gigafactories. Those factories would have to be up and running by 2027, 2028 to be able to deliver on our 2030 goal. It’s close to impossible to do that.”