Volkswagen, Ford, BMW Give Tesla a Run for Its Money
With Tesla’s (Nasdaq: TSLA) Model 3 production in full swing, it is the current undisputed leader when it comes to electric vehicles.
According to Bloomberg’s Model 3 production counter, Tesla has produced 136,130 Model 3s as of this writing.
And for those who said Tesla would fail, CEO Elon Musk is proving them wrong. The current Model 3 production rate is about 4,400 cars per week.
Things are looking up for the 21st-century EV pioneer. But the competition is heating up… and quickly.
Last Friday, Volkswagen AG (OTC: VWAPY) said it was going on the EV offensive. It’s planning to spend a whopping $50 billion to refocus Volkswagen on EV manufacturing, autonomous vehicles and new forms of mobility.
And as big as Volkswagen is in Europe, it’s partnering on the project with one of the biggest U.S. carmakers, Ford Motor Company (NYSE: F).
Both Ford and Volkswagen are putting the finishing touches on the deal. It’s expected to be finalized by the end of the year.
By partnering on such a huge research and development undertaking, both companies can save precious capital. And the two automakers didn’t pick each other arbitrarily.
Volkswagen already sells 15% of all vehicles purchased in China, the world’s largest car market. And Ford is the U.S. pickup truck sales leader, with about 40% of the market.
The European car company is also converting three existing German plants to exclusively produce EVs.
Part of the urgency is driven by new and tougher European Union greenhouse gas emissions standards. They are set to take effect in 2021, a few short years from now.
The War Heats Up
The last EV that BMW (OTC: BMWYY) announced was its i3. And that was back in 2013.
But now, on the heels of Tesla’s Model 3 production ramp-up, BMW announced its latest EV ambitions. By 2021, the German automaker will have a total of five all-electric models.
BMW is taking a different tack than Volkswagen or Ford. Its new vehicle architectures are extremely flexible.
The company expects to be able to make all-electric, hybrid-electric and internal combustion engine vehicles starting with the same chassis. And it plans to make all three versions on the same flexible production line.
The thought is that BMW will always have the ability to manufacture the perfect “mix” of vehicles, regardless of their powertrain. By the end of next year, it expects to have more than 500,000 EVs on the road.
Unlike Volkswagen, BMW is currently sourcing its battery cells from a Chinese company. Contemporary Amperex Technology Co. is making batteries for the company at its plant in China through 2020.
All models from 2021 onward will have cells made at Contemporary’s new plant in Erfurt, Germany. This means BMW’s entire EV value chain will be in Germany.
In order to hedge its bets on battery production, BMW is also forming joint ventures with Swedish and Belgian battery makers. Not a bad idea, since batteries are crucial to EV functionality.
All Good for You
Tesla expects to be profitable every quarter from this point onward. But some heavy hitters from the established automotive world are serving up some real competition.
It’s all good news for consumers and potential EV buyers. Lower-priced entry models are coming to compete with the Model 3.
Within five years, I expect there will be plenty of EV models in the sub-$30,000 range… and that’s without subsidies.