Traditional carmakers were being dismissed as relics of the past, stubbornly clinging to combustion engines as Tesla Inc. zoomed past them in terms of technological prowess and stock market valuation. Volkswagen AG’s Herbert Diess is changing that conversation.
As my colleague Craig Trudell writes in Bloomberg Businessweek, a recent series of rapid-fire announcements from Diess on how he aims to dethrone Elon Musk as Technoking of electric cars has suddenly turned VW into the world’s hottest auto stock. Its common shares have surged more than 70% this year.
It’s a remarkable development when you consider the emissions chicanery at VW that pre-dated Diess. A little less than six years ago, VW admitted to rigging millions of diesel engines to hide how dirty they were. The company paid out more than $30 billion in damages and settlements globally and suffered irreparable reputational damage.
There’s a personal redemption element to this story, too. Diess, 62, endured infighting and whispers about his job status at several points last year before VW’s supervisory board cleared the air. The fact that he’s not only still standing today but thriving offers some hope to peers who used to laugh off any suggestion that Musk’s company — which was on weak financial footing until only the last couple years — could push them aside.
At least one CEO is already following his lead. A day after the first of VW’s EV-themed events last week, Oliver Zipse of BMW AG unveiled more ambitious plans for electrifying Ultimate Driving Machines. The reaction was as hoped — BMW shares surged. Suddenly, the talk among analysts is about the power of the established carmakers to thrive in the face of competition from ambitious and outspoken startups.
“The market is waking up to the transitions of legacy automakers,” says Michael Dean of Bloomberg Intelligence. “The companies are becoming worthy rivals to Tesla and effectively ending the U.S. monopoly on premium electric-car sales.”
VW has long had plans to develop the industry’s broadest lineup of battery-powered autos, but it wasn’t getting much credit for this until recently. That’s something VW itself is partially responsible for — when it takes forever for a company to get all of its key stakeholders to embrace change, investor hesitance is better understood.
The tide started to turn when analysts published a series of bullish reports on VW’s first dedicated EV for the mass market, the ID.3 hatchback, rating it the most credible challenger to Tesla’s Model 3. Still, what was missing was a shakeup — something that would force the attention on the company in a new way. “Power Day,” a glitzy event that shamelessly copied Tesla’s “Battery Day,” was just that. Diess unveiled plans to invest in charging stations and build six battery factories to transform VW into one of the world’s biggest cell producers. VW-related Google searches and exuberant blog posts and tweets followed. The meme-stock crowd was on board.
The question now is, will this all stick? Retail investors can be fickle, and Diess still has some work ahead to turn his bold plans into reality. Building up all that battery capacity will take time and money. And VW still is years behind Tesla when it comes to software development.
While the people of Wolfsburg shouldn’t celebrate just yet, the developments of the past couple weeks have been a huge boost. “Many in the industry questioned our approach,” Diess said last week. “Today they are following suit, while we are reaping the fruit.”
Stefan Nicola covers Europe’s auto industry for Bloomberg News from Berlin. He writes weekly for Hyperdrive on the future of transportation.
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Stefan Nicola in Berlin at email@example.com© 2021 Bloomberg L.P.