At last month's Frankfurt Motor Show, Volkswagen's (NASDAQOTH:VLKAY) Audi and Porsche brands each showed off concept versions of battery-electric vehicles. If they're produced, they look likely to be the first direct competition to Tesla Motors' (NASDAQ:TSLA) electric luxury vehicles.
But not long after the show, Volkswagen was accused of equipping millions of diesel-powered cars with devices that enabled cheating on emissions tests.
VW is now facing billions in potential fines, and (among others) the product-development chiefs for both Audi and Porsche appear to have been ousted. That calls those timeframes into question. VW may have to cut back on product-development in order to absorb what will likely be massive costs related to the scandal. And it will certainly have new leadership.
Some electric-vehicle proponents were already skeptical of VW's claims for its electric Audi and Porsche, which included recharging times much quicker than Tesla's.
But the scandal raises more questions. Given what we know now, does VW have a chance of competing seriously with Tesla?
Jason Hall: The funny thing about Tesla's "huge" success so far, is that on the scale of global auto manufacturing, the company is still little more than a blip on the radar. Here's some context.
Through September, automakers have sold around 13 million cars, just in the U.S. market. Tesla is on track to sell around 50,000 cars globally this year. GM sold 251,000 cars. In September. In the U.S. alone. Volkswagen sold nearly 44,000 in the U.S. in September.
The point is, as disruptive as Tesla has been so far, the company hasn't come close to shifting the balance of power in the auto world in terms of sales. The company has simply lifted the profile and changed the perception of what an EV can truly be.
The Model S has caused a stir in the high-performance luxury sedan niche, as one of the best-sellers in that segment since its launch. But it's a small segment, with only a few big players. And I think that's what gets to the heart of Tesla's strength, and why it will continue to dominate the space. Automakers like VW will continue to look past the company as a viable threat.
Yes, VW (even with the diesel scandal) will have huge resources to throw at developing EVs, and it's already starting with the Porsche Mission E, with Model S-killing performance specs. But the Mission e is three or more years away, and those awesome specs aren't even possible based on current technology.
The bottom line is this: Tesla has a huge head start over anyone developing an EV. The amount of data alone they've been able to collect on the hundreds of millions of miles driven in tens of thousands of Roadsters and Model S's is something that VW and its ilk can't just throw money at.
No other carmaker has that advantage, and will be working from scratch, dealing with problems Tesla corrected years ago. That's not even considering things like the Gigafactory, which will address a major challenge for large-scale EV manufacturing in battery availability, and should help substantially lower total vehicle cost.
Don't get me wrong: I think VW may have to change course when the dust settles on "dieselgate" and EV development may be part of the strategy (it's hard to cheat emissions results on an EV), and I think VW won't be alone, and other major automakers will finally begin putting money and focus on developing "real" EVs.
But Tesla's lead may be insurmountable.
John Rosevear: With respect to VW in particular, I think it's too early to tell. But I think that these are the three big questions that need to be answered.
Will VW have to cut back on its ambitious electric-car plans because of the costs of its scandal?
VW itself probably doesn't know the answer to that yet. It's possible that the programs will be delayed for years. It's also possible that new CEO Matthias Mueller might put more money and effort into electric vehicles as a way to help move the company (and its public image) past the emissions scandal.
Will these cars really rival Tesla's?
Tesla is really good at making battery-electric drivetrains. And as the Model S and Model X show, it's getting very good at creating cars that appeal to luxury customers.
But it's a mistake to underestimate Porsche and Audi. Not only are both of VW's subsidiaries exceptionally good at making luxury-performance cars, but both are backed by a massive corporate push to become a leader in battery-electric vehicles. (Or were, at least.)
VW can (or at least could, before the scandal) commit billions of euros and huge teams of elite engineers to the project. Many reports suggested that it had. Assuming that these programs don't get cut back, I think it's very likely that the Audi SUV and Porsche sedan will compare quite well with their Tesla counterparts in 2018 or 2019. There will be pluses and minuses to each, but I think they'll be roughly comparable.
How large is the market for "premium electric vehicles," really?
That's still not clear.
Elon Musk insists that all automakers will switch over to electric cars eventually, and says that Tesla is simply showing the way. He might be right: Instead of stealing significant sales from Tesla, a great battery-electric Audi SUV might expand the market, drawing more customers away from gasoline-powered alternatives.
If that's how it plays out, then the Audi (and any other entrant) doesn't need to "beat" Tesla. It needs to compare well, and offer some things that some customers will find more appealing than Tesla's alternatives.
I think Audi can do that.
But it could also turn out that the number of well-heeled customers willing to put up with the compromises of an electric vehicle as they are today (or will be in 2018) is limited to a group not much bigger than the tech enthusiasts who have already flocked to Teslas. In that case, Audi and Tesla (and anyone else who decides to join this party) will have to battle hard for each sale.
If that's how it plays out, Audi will need to demonstrate convincing technical advantages over Tesla.
VW certainly has the resources to pull together a very good product, and the resources and scale to move this technology forward very quickly. But given the speed at which Tesla is moving, it might not be able to pull ahead by 2018.
Jason Hall owns shares of Tesla Motors. John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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