Here's Why Volkswagen CEO Thinks Tesla Is Weakening Itself Right Now

Zinger Key Points
  • Volkswagen is anticipating a strong second half of 2022 and inching closer to rival Tesla, according to CEO Herbert Diess.
  • Volkswagen believes it can overtake Tesla for the EV lead in the future, something backed by a publication.

The battle for dominance in the electric vehicle market is heating up and Volkswagen AG VWAGY believes it can pass Tesla Inc TSLA in the coming years. Volkswagen’s CEO shared one way he thinks Tesla could be weakening itself.

What Happened: Volkswagen is anticipating a strong second half of 2022 and inching closer to rival Tesla, according to a report from Reuters.

Chip shortages and supply chain issues are expected to be minimized, according to Volkswagen CEO Herbert Diess.

“We are earning more than ever,” Diess said.

Diess said in a recent meeting the company is ramping up production volumes for electric vehicles in territories like Germany and China. The

CEO said this could help the company meet its goal of being the electric vehicle market leader by 2025.

Diess called out Tesla needing to burn cash on large investments as a potential weakness.

“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him.”

Related Link: Volkswagen Set To Overtake Tesla By 2024 Says This Bloomberg Intelligence Report 

Why It’s Important: Not all share Diess’s take on the production ramp up. Electric vehicle site Electrek shared the take from the Volkswagen CEO and had this to say:

“Yes, it’s hard to ramp up production at two factories simultaneously, but Tesla has quite a lot of experience with that at this point,” Electrek said.

Electrek said Tesla could have production of 500,000 cars annually at each of the factories referenced by Diess in 2023. The website sees Tesla having annual production capacity of 2.5 million vehicles in 2023 compared to 1.5 million for Volkswagen.

One key to watch will be Tesla’s second quarter earnings report, which is expected in late July. Tesla cited chip shortages increased raw materials costs as issues hurting production and profits in the first quarter. Tesla said it expected supply chain issues to continue through the rest of 2022, leading to factories running below capacity.

Production and deliveries began at Gigafactory Berlin in March and at Gigafactory Texas in April, which makes the second quarter the first from the company that will have results from the two new gigafactories.

“We plan to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries,” Tesla said in its first quarter earnings report.

A report from Bloomberg calls for Volkswagen to pass Tesla by 2024 for the lead in electric vehicles. Tesla CEO Elon Musk poked fun at the report. 

“I would not agree with that forecast, no,” Musk said of the report.

Price Action: Tesla shares are down 2% to $684.86 on Wednesday.

Posted In: electric vehiclesElon MuskGigafactoriesGigafactory BerlinGigafactory TexasHerbert DiessNewsTrading Ideas