2023-05-13 05:36:23 ET
Summary
- Chinese OEMs like BYD, Geely and GAC are increasing BEV units at a higher rate than VW Group.
- Rivals like Tesla, Mercedes and BMW had higher growth rates of BEVs in Germany from 2021 to 2022.
- VW Group sold more BEVs than BYD in 1Q21, but now BYD sells nearly twice as many.
- Top leadership had to be replaced at Cariad as software delays continue.
Introduction
My thesis is that battery electric vehicle ("BEV") growth for Volkswagen AG (VWAGY) has been underwhelming recently.
At the time of this writing, €100 is about $109.
Overall Numbers
The 1Q23 presentation shows robust BEV growth from 2020 to 2021 (white to gray) but it slowed down from 2021 to 2022 (gray to green) and from 1Q22 to 1Q23 (green to light green):
The numbers in the 1Q23 chart from @Xil_llix speak for themselves; BYD (BYDYY), Geely ( OTCPK:GELYY ), GAC Aion and Chinese OEMs are increasing BEV units at a higher rate than Volkswagen. We see that Volkswagen had more BEV sales than BYD in 1Q21 but now in 1Q23, BYD has nearly double the BEV units of Volkswagen. Mercedes ( OTCPK:MBGAF ) and BMW ( OTCPK:BMWYY ) have also been outpacing Volkswagen over the last 5 quarters:
Global BEVs (1Q23 chart from @Xil_llix)
Investments Not Bearing Fruit
Given the massive amounts of money Volkswagen spends on BEVs via capex and R&D, it is disappointing that many other OEMs are seeing higher BEV growth. The IEA Global EV Outlook 2023 shows the outsized spend we're seeing from Volkswagen:
BEV investments (IEA Global EV Outlook 2023)
The above investments are continuing per a speech from CEO Oliver Blume in the 2023 annual general meeting which gets into the enormous sums of money being invested through 2027:
We plan to invest a total €180 billion up to 2027 - and over two thirds of that sum will be plowed into digitalization and electrification. We are also focusing on our world regions to put us in an even more robust position.
The failed software investments at Cariad have been enervating to shareholders over the last year. Top leadership at Cariad had to be replaced recently and TechCrunch detailed the delays :
Software 1.1 version is found in Volkswagen vehicles today. The software 1.2. platform is being developed for Audi and Porsche cars, while the 2.0 version will be an operating system designed for all Volkswagen brands. But efforts are at least two years behind schedule. The software 1.2 platform was supposed to be completed in 2022. Now Cariad is working to complete it this year to be ready for 2024 VW models.
Germany
Looking at the home market of Germany, an article from InsideEVs shows 72,110 Volkswagen BEVs and 14,937 Audi BEVs were sold in Germany in 2021. A year later, InsideEVs reported these numbers were 63,206 and 28,322, respectively. As such, VW's Audi brand grew nicely but the rest of VW struggled. Meanwhile, Tesla went from 39,714 BEVs to 69,963, Mercedes-Benz went from 12,278 to 25,182 and BMW went from 16,535 to 23,470.
China
China is by far the biggest BEV market in the world and Volkswagen has been outcompeted by Tesla, BYD, Geely, GAC Aion and others. At the 1:20 mark of the 2023 annual media conference , CEO Oliver Blume says that what he sees now in China is quite unique. He acknowledges that the tech progress has been very impressive. 25% of the new vehicles registered in China were electric and this is expected to reach 50% in 2025 or 2026. CEO Blume says OEMs are having an important race in this country where customers have different expectations with respect to smart cars and features like built-in karaoke systems. COO Arno Antlitz talked about getting a slow start in China in the 1Q23 call :
China EVs, yes, we had a slow start there. That's obviously - that's obvious. We want to catch up and we will catch up. I think last year, they had 155,000, if I remember sales in BEVs. And our target is that we clearly want to be above that, above 200,000 and we also need that BEV target in China in order to achieve the 10% share overall.
Closing Thoughts
It is important to differentiate between the automotive group and financing activities with respect to the valuation range and the enterprise value. The 2022 annual report says net liquidity for the automotive segment is €43 billion while it is €(169) billion for the finance segment.
Per the 2023 annual general meeting , EVs have risen to 7% of total deliveries. Management is targeting 10% for 2023 and 20% for 2025. Forward-looking investors should keep track of BEV deliveries as they unfold in 2023 to see if they end up being 10% of overall deliveries. Forward-looking investors should also pay close attention to the Capital Markets Day on June 21st.
Disclaimer: Any material in this article should not be relied on as a formal investment recommendation. Never buy a stock without doing your own thorough research.
For further details see:
Volkswagen's Recent BEV Growth Is Underwhelming