Published on March 10th, 2020 | by Steve Hanley0
UBS Is Bullish On Volkswagen EVs
March 10th, 2020 by Steve Hanley
Financial forecasts may not be worth the paper they are written on. The most recent example is Waymo, which Goldman Sacks valued at $170 billion in 2018. In actual fact, it is worth about $30 billion according to the investors who just pumped $2.5 billion into the company. Nevertheless, we are all fascinated by people who claim to know the future. Now along comes UBS, one of Switzerland’s most respected banks, to proclaim Volkswagen will be the first legacy automaker to earn a profit selling electric cars.
According to Forbes, UBS says in a new report that Volkswagen will start making a profit from selling electric cars beginning in 2022. [Note: Forbes does not provide a link to such a report, a startling lack of journalistic integrity, and a search for the report on the UBS website turned up nothing. Reader beware!]
Based solely on what Forbes reports, UBS predicts battery electric car sales will hit 15% of the new car market by 2025. By contrast, Volkswagen claims EVs will be 25% of sales by that date. Morgan Stanley projects the correct number will be 11% by 2025. Our readers are free to choose any date they want, as clearly no one has any idea what the future of electric cars will be, especially now that the coronavirus is upending global supply chains.
UBS also says in a survey conducted as part of its report, 36% of respondents expressed a preference for Tesla vehicles but that could change as German manufacturers bring more electric models to market. “In a head-to-head comparison, consumers would still prefer an electric Audi, BMW, or Mercedes over a Tesla. The key issue is that these brands still lack competitive products, which could change in 2021,” the UBS report said.
“A winning EV is a combination of an acceptable range — 280 to 310 miles (451 to 499 km) — at a price point roughly on par with equivalent conventional cars, as proven by Tesla’s success. We think VW is the first global [manufacturer] to deliver such product and thereby climb the scale curve fast. Consequently, VW should be the first [manufacturer] to make money with BEVs. Premium [manufacturers] lack scale in BEVs and are unlikely to close the technology/performance gap to Tesla soon, which bears the risk of unprofitable EVs and the loss of market share,” the report concluded.
There is a corollary to the UBS report and it involves plug-in hybrids. While they make sense in a lot of situations — most can travel on battery power alone for daily driving needs — many people don’t bother to plug them in, negating all the positive benefits associated with them. A PHEV with a discharged battery is just another conventional car with an internal combustion engine. European regulators therefore frown on plug-in hybrids and UBS sees them getting no more than 1.4% of the market by 2025.
Figures lie and liars figure, and predictions are worth precisely what you pay for them. Volkswagen has committed $36 billion to the changeover to electric cars and it clearly intends to remain profitable as the EV revolution moves forward. Sadly, no one knows what EV sales will look like in 2025, but if the switch over to electric transportation doesn’t happen soon, the climate consequences from more and more fossil fuel emissions will bring the world closer to a climate disaster. Support Mother Nature. Drive an electric car!