Tesla/Apple vs. Volkswagen/Samsung?
Zachary Shahan has done an admirable job of reporting on Volkswagen’s Power Day presentation, which laid out in detail how the company plans to meet the challenge of transitioning to an electric car manufacturer instead of being a maker of cars with infernal combustion engines. Keep in mind that Tesla and many EV startups like Lucid, Rivian, Canoo, Xpeng, NIO do not make conventional cars. Therefore, they don’t have to be concerned with how to continue doing what they have always done while they change over to the new market paradigm.
Volkswagen has hundreds of thousands of factory workers, dealers, service personnel, designers, and engineers who depend on it for their livelihoods. It’s easy to bash a traditional company and say they should just stop selling gasmobiles but the financial pain that would cause would be considerable. Managing the transition in a way that is fair to all stakeholders is a complex and difficult task. One sidelight to the Power Day event was an historic agreement with the works council — the equivalent of the United Auto Workers union in the US.
The new agreement expands early retirement opportunities for older workers and focuses on expanded training programs to provide the new skills current workers will need to fill vacant positions within the company. Volkswagen is adding €40 million to its retraining efforts, bringing the total to €200 million.
Bernd Osterloh, chairman of the General Works Council, said on Monday, “We are continuing what has proven to work. This especially includes partial retirement, which we rapidly called for to be opened up to the 1964 birth cohort without delay. The finish line is now in sight. For our older colleagues, partial retirement is a good opportunity to enter their well-deserved retirement a bit earlier. The same goes for the other programs aimed at older birth cohorts.
“What all these measures also clearly show is that the works council is taking pains to ensure that the departures do not impact on the remaining employees. VW is sticking to its tried-and-tested approach: we will recruit new staff where necessary, and there will be no work intensification. What is more, we will continue to build up our business in cutting-edge fields, reinforced by our internal transformation.”
Tesla Is To Apple As Volkswagen Is To Samsung?
Recently, after a thorough teardown of the Volkswagen ID.3, UBS pronounced it to be a worthy competitor to the Tesla Model 3. Some may carp and say “almost good enough isn’t good enough,” but bear in mind, Tesla has been building tech-centered electric cars for a decade now. Volkswagen is just joining the party. UBS also announced last week it believes Tesla and Volkswagen are destined to be the top EV manufacturers in the world. UBS AG analyst Patrick Hummel wrote after the ID.3 teardown, “VW might not be the Apple, but the Samsung of the EV world,” he said earlier this month.
“If you fail to plan, you plan to fail,” according to an old expression. Lots of people who watched Volkswagen Power Day live found it a bit on the boring side. Volkswagen could learn a thing or two about how to put on a show from Tesla, but the upshot was that the German manufacturer has made detailed plans for the future, most of them steeped in exquisite detail, and is powering ahead to put those plans into action.
In an email today, Bloomberg Green contributor Akshat Rathi writes, “Apple Inc. built an ecosystem that integrates hardware innovations such as processing chips and camera sensors with software lock-ins like the iOS operating system and the App Store. It may have annoyed many users, but Apple has stuck with its proprietary lightning charging cable. Tesla has done something very similar with EVs by developing its own battery chemistry, electric motors and driver-assistance system. It has also built a supercharging network other cars can’t use (at least not yet).
“Google’s Android operating system and Samsung Electronics Co. managed to carve out a significant share of the global smartphone market, but Apple became the world’s most valuable company by building a dominant brand and ecosystem for which consumers are willing to pay much more.” He thinks a similar scenario may play out in the electric car space.
“Tesla will likely maintain its broad EV leadership,” Ben Kallo, an analyst at Robert W. Baird, tells Bloomberg Green. “We view Volkswagen as a potential leader in the ‘non-Tesla’ portion of the EV market. A non-Tesla EV ecosystem will emerge, similar to the non-Apple ecosystem in smartphones (i.e., Android).” Venkat Viswanathan, an associate professor at Carnegie Mellon University, adds that Tesla’s drivetrains — comprised of both batteries and electric motors — are four or five years ahead of the competition. They offer “the highest driving range for the same battery capacity,” he says.
Bloomberg Green thinks there may be one area in which Volkswagen has the lead over Tesla — solid state batteries. Volkswagen has invested heavily in QuantumScape while Tesla “has not said anything about developing solid state batteries,” Rathi writes. But there is this caveat. Just because Tesla hasn’t said anything publicly about solid state technology, don’t assume it is not pushing just as hard as possible to make that technology available to its customers.
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The V2G Revolution
One item from Volkswagen’s Power Day presentation struck me as possibly as important if not more so than all the others, but it kind of got buried under all the technical highlights. The company says as of 2022, it will actively promote vehicle-to-home and vehicle-to-grid technology. This is huge. Not only will the electric cars of the (near) future lower emissions from the transportation sector, they will also play a significant role in supporting the reliable operation of local utility grids.
Why is that big news? Because up until know, battery manufacturers had to decide whether to make cells for energy storage or transportation. With this new initiative, those cells can do both. Add in smart grid and charging protocols and the world’s fleet of electric cars could become a critical factor in making more microgrids a reality. Distributed renewables are the future and V2G will move that technology forward. Not only that, owners of electric cars could be in line to make some money by allowing local utilities to have access to the batteries in their cars.
In addition, vehicle-to-home systems will revolutionize residential energy storage. Homeowners and small business won’t need to buy standalone storage batteries if they can connect to an EV with 50 kWh or more of capacity sitting in the garage. What would you rather do with your electric car, rent it out to strangers who might vomit on the rear seat or earn a little cash by connecting to the local electrical grid while you’re sleeping or at work? I know what my choice would be.
The Takeaway
Let’s be right up front. Tesla is the leader in electric transportation and is doing everything possible to stay there. Its cars are clearly the most efficient and best equipped for road trips today. They are the iPhones of the transportation world. But Volkswagen is chuffing right along behind, putting its money and manufacturing muscle where its mouth is. Chocolate or vanilla? Coke or Pepsi? iPhone or Samsung? Tesla or Volkswagen? It’s good to have choices and the EV revolution will happen faster because of them.
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