The clamour to compete with Tesla: VW and GM have a mammoth task ahead

A clear leader emerged in global electric vehicle sales in 2019 across both the US and Europe, and it is proving a wake-up call to industry, most evident in the amount of noise we are hearing from auto giants Volkswagen and General Motors.

Tesla claimed more than 60% of the growing battery-electric car market in the US last year and led the way in Europe with almost 100,000 Model 3s sold alone in 2019.

Legacy automakers are aware of the impending shift away from gas-guzzling cars, fuelled by the increasingly urgent fight against dangerous climate change – and risk damage to their reputation, and ultimately their bottom lines, if they don’t do their part.

But Tesla has a head start and is bolstered for future growth in sales of its “mass-market” Model 3 and upcoming Model Y, with the recent opening of its Shanghai Gigafactory 3 and CEO and co-founder Elon Musk due to attend the sod-turning for its Berlin Gigafactory 4 later in March.

Established automakers have a lot of catching up to do, and this has become all the more apparent again this week, most notably in reports from media outlets about Volkswagen’s plentiful supply of EV batteries and General Motors’ plan for an “EV Day”.

Volkswagen of course, still reeling from the “Dieselgate” scandal of 2015 in which it was revealed it had cheated in vehicle emissions tests, has more recently become one of the most vocal of legacy carmakers on electric mobility in its efforts to redeem itself, desiring to claim a leading title in the transition.

Even while it grapples with software issues for the first in its new electric ID series, it has been reported by the Financial Times that Volkswagen CEO Herbert Diess says VW can source enough electric vehicle batteries for 1 million electric vehicles over the next three years.

This is curious given reports last week that Volkswagen AG sub-brand Audi said it has been forced to halt production of its all-electric e-Tron due to battery supply issue.

It is also interesting to note that Diess seems to have downgraded Volkswagen’s plans from “taking on Tesla” to keeping “as close as possible” to Tesla.

“Elon Musk is taking risks we couldn’t. So I think we make a good pair because he is pulling ahead, and we are fast-followers, we try to keep as close as possible,” Diess was reported as saying by FT.

This pullback is contradictory, and telling: in 2018, Diess claimed that Volkswagen – which has an annual production target of 330,000 ID3 hatchbacks a year from its Zwickau plant – would bring electric cars to market that were as good as Tesla electric cars but half the price.

“We will come in 2020 with vehicles that can do anything like Tesla and are cheaper by half,” he said in comments on German television program ZDF.

But as FT points out, Volkswagen’s group-brand structure is slowing down the speed with which VW is able to change internal attitudes – and curtail labour costs.

It also notes that both Volkswagen and General Motors are “years, perhaps even a decade, from being able to generate petrol-level profits.”

Despite the mammoth task of redirecting the focus, and operations, of these behemoth car makers from the production of internal combustion engines to electric drivetrains, the outward message at least is that they are not daunted.

And yet, the actions imply the opposite – a reality most evident in General Motors’ announcement on Monday (US time) that it would hold an “EV Day” this Wednesday at 12:30pm (4:30am on Thursday for those in daylight savings on the Australian east coast).

The event is portrayed by CNBC as GM’s “hardest push to convince skeptics that the more than 110-year-old automaker can compete, if not thrive, against Tesla.”

It will, according to a press release from General Motors, reveal details about the carmaker’s electrification strategy from both management and electrification experts to media and investors, with separate events during the week for politicians, dealers and employees.

The EV Day reportedly has the support of key players in the company’s leadership team, CEO Mary Barra and  President Mark Reuss.

In previous earnings calls Barra has taken pains to reassure investors that General Motors was taking its electrification plans seriously – and that it would make a full range of EVs including utility trucks (utes in Australia, pickups in the US).

“GM has an industry-leading truck franchise and industry-leading electrification capabilities,” Barra told investors and journalists at the company’s quarterly earnings call in May 2019.

“I assure you we will not cede our leadership on either front. We intend to create an all-electric future that includes a complete range of EVs, including full-size pickups.”

But since GM first announced its intention to transition to making electric mobility in December 2018, there does not seem to have been a great deal of movement towards that goal, outwardly at least. The car maker has since released only three new electric cars in China, trumpeted a new all-electric Hummer at Superbowl and announced EV production upgrades for its Michigan plant.

According to comments made by Reuss as reported by CNBC, the details to be laid out this week by GM will satisfy sceptics.

“I really like our position heading in the area of electrification, and I like it for a lot of different reasons,” Reuss was quoted as saying to investors last month about the EV Day.

“I think you’ll be very excited about some of the things we’d go into a little more detail than I’ve talked about today … Again, we’ll go into more of that here next month, but this is a very, very well-thought-out strategy.”

Of course, here in Australia the impact of this refocussing of resources to electrification has had its own impact, with GM in February announcing the painful decision to shut down the iconic Holden brand, laying off hundreds of local workers.

While little mention of the reason behind that shutdown was made in mainstream Australian media, the reality is certain: it is going to take considerable efforts for GM to catch up, let along compete, with Tesla on electric cars.

As noted by Credit Suisse’s Dan Levy in a note (as reported by CNBC) on Monday, “the push to an EV world will be tough for all legacy (automakers) … including GM.”

Diess, at least, remains optimistic, despite the Dieselgate legacy and ongoing ID.3 software issues that threaten to delay a European summer launch.

In comments welcoming regulations aimed at pushing a transition to zero-emissions vehicles, he said:

“We are happy with it because if society decides [to lower emissions laws], we’ll go for electric cars. Actually, that’s good for us.

“There is no other alternative to electric cars.”