Yahoo Finance Volkswagen (VWAGY) Appears Well-Poised for EV Supremacy
Volkswagen VWAGY has been making significant strides in electrification, positioning itself as one of the leaders in the shift toward sustainable mobility. This Germany-based automaker has committed to an ambitious plan to electrify its entire fleet by 2030, with the goal of achieving carbon neutrality by 2050.
Recently, the auto biggie announced plans to invest around €1 billion toward creating a fresh hub in Hefei, China, dedicated to the development, innovation and procurement of fully integrated electric vehicles.
In another development, Volkswagen's new electric-vehicle battery plant in Ontario is set to receive up to $13 billion in annual production subsidies from the federal government, marking the largest amount of financial support ever provided by Canada to attract an automaker to establish a factory in the country. This investment not only highlights the growing competition among governments to attract clean technology investments but also represents an opportunity for investors to capitalize on the expanding EV market.
VWAGY Launches 100%TechCo in China
100%TechCo is set to combine vehicle and component R&D with procurement, enabling a more efficient development process that leverages synergies and integrates state-of-the-art local technologies at an early stage. The new unit is scheduled to be launched in early 2024. The R&D center is expected to reduce development times for new products and technologies by around 30%.
This strategic move will help Volkswagen Group to align its vehicles more closely with the preferences of customers in China, ultimately leading to a shorter time to market. Ralf Brandstätter, group board member for China, emphasized the importance of this move as part of Volkswagen's “in China, for China” strategy. The latest development builds on further strategic measures designed to address market-defining trends in China and significantly increase the speed of innovation locally. For instance, the company also announced a strategic partnership with Horizon Robotics, a leading provider of hardware and software solutions for automated driving in China.
100%TechCo will not only consolidate R&D for vehicles and components in China but will also merge procurement into a joint unit, integrating local suppliers in the early stages of product development. This approach will ensure that the latest technologies and application concepts are integrated into new products, catering to the Chinese market more effectively. Furthermore, the new company will closely integrate the development projects of all Volkswagen Group's joint ventures in China, such as SAIC Volkswagen, FAW-VW and Volkswagen Anhui.
Initially, 100%TechCo will focus on steering the development of Volkswagen Anhui joint venture models based on the MEB platform, as well as being responsible for the development of China-specific platform requirements and modules with an emphasis on electric mobility. The company is expected to play a major role in the development of a future Volkswagen brand model, set to be launched in 2024.
For investors, this move signals Volkswagen's commitment to expanding its presence in the rapidly growing Chinese market, enhancing its product offerings and staying ahead of the competition. The reduced development time and increased focus on localized innovation are likely to result in improved market share and profitability for the company, potentially boosting Volkswagen's stock performance in the long run.
Government Backs VWAGY’s Canada Battery Plant
Volkswagen is set to receive up to C$13 billion ($9.7 billion) in subsidies and a C$700 million grant from the Canadian government to build its North American battery plant in the country.
The Volkswagen battery plant, backed by both federal and Ontario government funding, will match the financial incentives the company would have received from the United States through the Inflation Reduction Act (IRA). This move showcases the pressure exerted by the U.S. green package, which offers $369 billion in subsidies for EVs and clean technologies, on other governments to increase financial incentives to attract investments.
With a maximum capacity of 90-gigawatt hours, the new battery plant will produce batteries for over a million cars annually. Volkswagen's battery unit PowerCo, established in 2020, is targeting more than 20 billion euros ($21.94 billion) in annual sales by 2030. Volkswagen expects PowerCo to meet half of its own demand with plants primarily in Europe and North America.
For investors, this development offers an opportunity to invest in Volkswagen and benefit from the growing demand for EVs and the company's increasing focus on battery production. The plant's scheduled production start in 2027, combined with PowerCo's ambitious sales target, could lead to significant growth for Volkswagen in the coming years.
VWAGY’s Big Electrification Push
Volkswagen plans to invest EUR 180 billion in 2023-2027 to cement its position in the EV domain. By 2025, out of every five vehicles sold, one is expected to be all-electric. The investment is expected to peak in 2025 and may start declining thereafter. The auto manufacturer’s BEV share was 7% in the last reported year. With its new model launches, the BEV share is expected to reach 10% of total deliveries in 2023. VWAGY's efforts are centered around its ID. electric vehicle family, which includes ID.3, ID.4 and ID.5.
The new models scheduled for 2023 are ID.7, ID.3, ID. Buzz Long Wheel Base, Audi Q8 e-tron and CUPRA Tavascan. The ID. electric vehicles are built on VWAGY's modular electric drive matrix platform, which enables scalable production and flexible design. The company plans to produce the ID. family of vehicles at its plants in Europe, China and the United States.
VWAGY acquired a 4% vehicle market share in the North America market and targets to increase the share to 10% by the end of 2030. This will be mostly driven by the rollout of the ID. Buzz and ID.7 in 2024.
In addition to its electric vehicle production, VWAGY is investing heavily in battery technology and production. VWAGY aims to have six gigafactories producing battery cells in Europe by 2030, with a total production capacity of 240 GWh. Moreover, VWAGY is committed to sourcing sustainable and ethically-produced raw materials for its batteries. The company has partnered with various mining companies to secure supplies of nickel, cobalt, and lithium, crucial components of EV batteries.
VWAGY's electrification efforts are also reflected in its charging infrastructure. The company’s joint venture with Enel X to provide a comprehensive charging network for its customers across Europe bode well.
VWAGY currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for the company’s 2023 and 2024 revenues implies a year-over-year uptick of 6% and 2.2%, respectively.
Other Key Picks
A few other top-ranked players in the auto space are Geely Automobile Holdings Limited GELYY, BYD Company Limited BYDDY and Ferrari N.V. RACE, all of which sport a Zacks Rank #1 at present.
Geely is engaged in automobile manufacturing and related areas. The Zacks Consensus Estimate for GELYY’s 2023 sales and earnings implies year-over-year growth of 57.5% and 7.4%, respectively.
BYD is engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries, and mobile phone components. The Zacks Consensus Estimate for BYDDY’s 2023 and 2024 sales implies year-over-year growth of 175% and 26.2%, respectively.
Ferrari is engaged in designing, manufacturing and selling sports cars. The Zacks Consensus Estimate for RACE’s 2023 sales and earnings implies year-over-year growth of 14% and 19.8%, respectively.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Geely Automobile Holdings Ltd. (GELYY) : Free Stock Analysis Report
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