Volkswagen is beating Tesla in Europe, but for how long?
The news that Tesla’s Model 3 was the best-selling car in Europe in September was surely an embarrassment for the German automakers, but they are far from beaten. The Volkswagen Group has risen from the ashes of its 2015 emissions scandal to become the EV market leader in Europe, where the company reported that it had 26% market share in the first half of 2021.
Source: Tesla / Volkswagen
As CNBC reports, while Model 3 has become the best-selling individual model, the Volkswagen Group, which includes Audi, Porsche, Skoda and SEAT, is the best-selling EV-maker in Europe (although Tesla sells a lot more EVs globally). There are several likely reasons for this: the VW brand has ruled the European auto market for decades; VW’s flagship EV, the ID.3, boasts a lower price point than anything in Tesla’s stable; and local manufacturing makes it easier to get cars from factories to driveways.
However, the September surprise could be only an omen of a bigger upset in the making. Once Tesla’s Berlin Gigafactory starts delivering cars, which is expected to happen in the next month or two, Volkswagen’s main advantages over the American upstart are likely to erode. Once Tesla increases its production volume, and eliminates the long delivery chain from China and/or the US, it could choose to shave its prices in the European market. And when it comes to branding, Tesla David has had Big Auto Goliath on the run for some time now. The more Teslas appear on European roads, and the more enmeshed Tesla becomes in the Brandenburg economy, the stronger its already trendy brand will become.
Meanwhile, there’s an internal struggle going on in Wolfsburg that threatens VW’s status as the most charged of the legacy automakers. Volkswagen Group CEO Herbert Diess, who the Financial Times has called “the only incumbent CEO who seems to take Tesla seriously as a rival,” is facing challenges from within the company and its union. Germany’s Handelsblatt (via Teslarati) reports that the company’s Supervisory Board and its CEO failed to reach agreement at a recent meeting, and his future at the company could be in jeopardy. [Update: it appears Diess's position as CEO remains intact, for now.]
Looking back, Diess landed in hot water with employee representatives after some cavalier comments about the threat of job losses. However, many in the media (and apparently, some at Volkswagen) disagree about what it was Diess actually said. According to Reuters, in September, Herr Diess warned that his company could lose 30,000 jobs if it transitioned too slowly to electric vehicles. Somehow, the story got turned around, and media outlets were reporting that it was Diess’s pro-EV strategy that would result in the 30,000 pink slips. It almost doesn’t matter what he actually said—any mention of lost jobs can be enough to cause union reps and politicians to have panic attacks, and shooting the messenger is a classic response.
If Diess were to depart, or to be pressured into turning down the voltage at VW, it could be devastating for the company, and for the EV industry (no, Diess is not going to replace Elon Musk at the helm of Tesla, as many online commenters fantasized). These days, many legacy automakers are putting on big shows about their future EV plans, but none are actually selling any substantial numbers of EVs in the present. VW is one of the few that’s backing up its butterflies-and-grandchildren rhetoric with real vehicles sold to real customers. Tesla can’t electrify the world on its own—we need Diess, and a few more like him.