The theme of electrification continues to be a driving force on our ESG Safeguard platform. We picked up on German auto-maker Volkswagen taking recent initiative to increase production capacity and develop Europe’s charging infrastructure. In fact 4Q 2020 had VW slightly outselling more EVs than Tesla. We explore the impact of these recent headlines in detail.

Sam Leavitt
March 19, 2021

ESG Spotlight: Electrifying Developments in the Auto Sector

ESG Spotlight: Electrifying Developments in the Auto Sector

Our ESG Safeguard platform continues to see electrification as a driving theme in coverage. As the race to electrify accelerates, more manufacturers are making sizable investments to catch up with Tesla (TSLA:US) and their significant market share. While Tesla has a sizable first mover advantage in this space, other legacy manufacturers like GM (GM:US) and Volkswagen (VOW3:DE) have recently doubled down on development and production. Volkswagen made headlines this week announcing six new battery plants that will be located in Europe.

VW Roadmap

Volkswagen’s initiative is part of a much larger strategy to surpass Tesla’s market share in the EV space by 2025 through battery technology, charging infrastructure, and leveraging economies of scale across their brands. Volkswagen is investing $35b Euros over the next four years to build battery plants, with the goal of having all locations operational by 2030. The first operational facility will be located in Sweden and produce batteries as soon as 2023. The second factory will be up and running in Germany by 2025. This comes in the wake of Tesla building their own gigafactory near Berlin.

ESG Safeguard Platform: Automobile Environmental Impact Scores, Past 7 Days

Economies of Scale

Volkswagen aspires to introduce a scalable battery cell that will work across all their brands, with the goal of producing batteries for electric vehicles in-house instead of sourcing from third parties. Volkswagen estimates that they can cut battery costs in half by 2030. Volkswagen Auto Group owns an extensive portfolio of brands that include Audi, Lamborghini, Bentley, and Porsche in addition to the iconic Volkswagen namesake. The reach and diversity in the brand portfolio positions the automaker to sell electric vehicles for a wide range of consumers. Along these lines, the Volkswagen roadmap appears to be concentrated on primarily securing the European market where they are based.

Charging Up

Another piece of the Volkswagen strategy is investment in charging infrastructure to hasten the transition to electric vehicles, installing their own EV charging stations as of last year. In addition to their own installments, they are partnering with a variety of energy groups including BP (BP:GB) and Iberdrola (IBE:ES). The partnership includes financial commitments from Volkswagen as a part of their $35b strategy towards rapid electrification.

In our November coverage on Tesla, we show that it’s the clear leader in the space. Now, as the market is adapting, other large manufacturers are evolving to match the market shift. Volkswagen had the second largest market share of electric vehicles as of November 2020. Now they are starting to close the gap as reports show the German manufacturer sold more electric vehicles in the fourth quarter of 2020 than Tesla.

Overcoming the Past

Volkswagen is still reconciling its Dieselgate past, as its fiasco over cheating on emissions standards, took place only recently in 2015. This blunder caused a change in leadership and marred the image of the German automaker in its wake. The Volkswagen Group has been led by CEO Herbert Diess since 2018, marking the second change in leadership since Martin Winterkorn left the company post-emissions scandal. Diess is the leader piloting Volkswagen for the foreseeable future and will be responsible for executing the grand vision he has laid out for the company. While Elon Musk has just dubbed himself the “Technoking” of Tesla as an official title, the bold vision of Herbert Diess poses Musk with a worthy adversary in the auto-space.

Start Your EV Engines

Recent estimates suggest that EV sales will overtake sales of internal combustion vehicles as soon as 2025. With GM and Volkswagen accelerating their production goals to match Tesla in a short period of time, we can expect the electric vehicle market to grow more crowded as it becomes larger.

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About Amenity

Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.

This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.

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