VWAGY Stock Worth Watching as Company Increases EV Production

Tesla Inc (NASDAQ:TSLA) is the world’s largest electric vehicle (EV) manufacturer, but it could lose that title to Volkswagen AG (OTCMKTS:VWAGY) as early as 2024.

In full-year 2021, Tesla Inc delivered a record 936,222 vehicles. In the first quarter of 2022, it delivered more than 310,000 vehicles, accounting for 75% of global EV sales. (Source: “Tesla Vehicle Production & Deliveries and Date for Financial Results & Webcast for First Quarter 2022,” Tesla Inc, April 2, 2022.)

Big numbers, but according to a recent study, Volkswagen AG will surpass Tesla Inc in terms of battery electric vehicle (BEV) sales volume in 2024. (Source: “Volkswagen to Overtake Tesla’s Battery Electric Vehicle Sales Crown by 2024, Finds Bloomberg Intelligence,” Bloomberg, June 14, 2022.)

The study says Volkswagen AG will hold on to the top spot in the global EV industry for the rest of this decade, with U.S and Japanese automakers vying for third position. Tesla Inc is expected to remain the dominant EV company in the U.S., however.

Volkswagen, instead of chasing potential EV buyers in the U.S., is expanding its presence in Europe and China. In 2021, North America accounted for less than 10% of Volkswagen's total vehicle sales. (Source: “Brands and Business Fields,” Volkswagen AG, last accessed June 27, 2022.)

In 2025, China is expected to be the third-biggest market for BEV sales. (Source: Bloomberg, June 14, 2022, op. cit.)

Top Reasons for Volkswagen AG’s EV Success

There are a few reasons why Volkswagen is projected to be the first legacy automaker to overtake Tesla in the EV market.

First, Since unveiling its "ID" concept car in 2016, Volkswagen AG has become a major player in the global EV market. Meanwhile, most of the other big automakers have been slower to adopt EV technology, and those companies' EV operations are being funded by their internal combustion vehicle operations.

Second, for EVs to run, companies need access to special batteries. The rising cost of those batteries—and limited production capacity—means the biggest U.S. automakers are playing catch-up.

Outside the U.S., Volkswagen AG is investing up to $31.6 billion in improving its supply chain. This includes opening six new battery-cell plants in Europe by 2030.

Third, Tesla’s CEO, Elon Musk, is famous for raising the prices of Tesla vehicles, and the company isn’t immune to industry dynamics.

In 2021, Tesla Inc announced price increases almost every month.

The company's price increases have continued in 2022, with a $1,000 markup in March on all Tesla vehicles that are equipped with long-range battery packs, followed by a smaller markup in April on long-range vehicles.

Then, in early June, Tesla Inc surprised the EV industry by announcing that the company was hiking the prices of all its vehicles, with some models going up by $6,000. (Source: “Tesla Increases Prices Up to $6,000 Across Lineup, Electrek Says,” BNN Bloomberg, June 16, 2022.)

“This has been a very tough quarter, primarily due to supply chain and production challenges in China. So we need to rally hard to recover!” wrote Musk in a recent e-mail to employees. (Source: Ibid.)

That rallying cry will need to be sustained for years to come if Tesla Inc wants to compete with companies like Volkswagen AG on an international scale.

Analyst Take

Tesla Inc is the largest and most famous EV company in the world, and not just because it’s helmed by the loudest CEO. But even the biggest EV player in the world can be toppled from its perch—and it might be by Volkswagen AG.

By all accounts, it looks like Volkswagen stock could be the EV stock for investors to keep their eyes on over the coming years.