Mixed Emotions: Volkswagen finds inspiration (and envy) in its fight to take on Tesla

Once again, rumors have been rattling around the German media that Volkswagen is planning to buy a stake in Tesla. In August, a German magazine quoted a couple of unnamed insiders saying that CEO Herbert Diess would like to have access to Tesla’s software expertise, and “would get in immediately if he could.” More recently, on the eve of the recent Frankfurt Motor Show, major shareholder Wolfgang Porsche tantalized journalists by saying that such a move would be conceivable if the price were right.

Above: Tesla and VW face off (Image: Tesla / VW)

At the Frankfurt show however, where VW launched its first native EV, the ID.3, Diess stomped on the speculation. “No, I wouldn’t consider a stake in Tesla,” he told Autocar. “I really admire what it has done, which is also helpful for us because it is really pushing us. The cars are nice and I like to drive them.” However, “I wouldn’t buy a stake because I think all they are doing, we can do.”

This echoes previous statements by Diess that he believes VW can replicate Tesla’s progress. “In the long run, I think we might have a bit of an advantage because of scale,” Diess continued. “On the hardware side, there is probably not so big a difference because they also have a dedicated electric platform and they’re quite big already for an EV manufacturer. But when it comes to the next big thing, which is software, Tesla is strong in software - but software really is a volume game. If you do software, you have to use ten million devices, not one million.”

The Volkswagen Group has set out to leapfrog legacy automakers in the race to electrify, and there’s no question that Tesla has been a major inspiration.

“In the next few years, our developers will be rolling out the very last combustion platforms,” VW Chief Strategist Michael Jost said in an interview with Business Insider. “Electrotransformation is not a temporary change, but our future business model.”

According to the German news magazine Handelsblatt, the Volkswagen Group will invest some $33 billion between now and 2023 to restructure the company for electrification. It expects to produce over 22 million electric vehicles over the next ten years, based on its modular electric drive matrix (MEB) platform. “This MEB can be scaled to work in China, the USA, and Europe,” says Jost. “We want to build a total of 70 models on the Group’s e-platforms over the next few years.”

Above: Why VW is betting on electric cars (YouTube: CNBC) 

VW has promised that the ID.3 hatchback will go on sale in Germany with a starting price below $30,000, and claims to have booked over 30,000 pre-orders. The company has no plans to sell the ID.3 in the US - however, also on display in Frankfurt was a camouflaged production version of the ID.4 CROZZ, a crossover that’s expected to hit the US market next year.

Jost freely acknowledges VW’s debt to Tesla and Elon Musk. “Without Elon Musk, my job would have been much more difficult,” he told Business Insider. “It is not easy to reshift a traditional company to e-mobility. You have to have a good plan and convince people.”

“Elon Musk certainly helped us. We looked at how he did it and how we want to do it,” Jost continued. “Even today, we still ask ourselves: ‘In what areas is he better than us and where do we have to overtake him - and where not?’”

Jost is well aware of the Innovator’s Dilemma that holds incumbent manufacturers such as VW back. “Tesla can do many things better because the company does not have a base,” he said. “We already have a huge working model that needs to be completely transformed. But Elon Musk doesn’t have that. He simply produces electric cars. He doesn’t have any brands to position. He focuses on electromobility and a sensible design. Tesla does a good job in many areas, whether it be in performance or battery concepts.” 

Of course, many an auto industry exec has heaped praise on Tesla, and BI asked Jost the obvious question: Why should a car buyer choose an electric VW over a Tesla? Jost had an answer ready: “We don’t build cars for millionaires, but for millions.”

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Written by: Charles Morris