Sun, 03 March 2019
If you have shares in Volkswagen Aktiengesellschaft (VW) on the Frankfurt stock exchange you may, over the next few years, be laughing all the way to the bank or wondering what on earth went wrong. You see, Volkswagen has recently committed USD48 billion George Washingtons of faith. The reason? Strategic development and outfitting of 16 factories globally in an attempt to win the electric car race over the next five years. Naturally, this kind of expenditure makes the money market men sit up and pay attention.
Apparently whenever a manufacturer unveils a new electric car, the market wonders if it is a "Tesla Killer”. Tesla continues to be the pioneer and market leader on electric cars for style, battery power and price. It appears that Volkswagen is not so much putting the money into developing an electric car ‘range’ per se. No, rather it is developing a 'skateboard' which is essentially the chassis/platform known as the Modularer Elektrobaukasten (MEB).
This MEB will form the building block for the 50 or so models that VW and its holdings of Audi, Skoda and Seat have planned by 2025.The idea of platform sharing is simple really; if cars could share the same chassis this would obviously save huge amounts of money in consolidation of design and production costs. Understandably then, the MEB concept for electric vehicles is now a massive focus of VW.
The company has been the leading manufacturer in design and production costs of vehicles for the last four years and plans to continue this for electric cars. Indeed, its MEB chassis may become as synonymous in the market as Hoover is to vacuum cleaners or Google to search engines.
To achieve this VW is in talks with other manufacturers to use the MEB. For example, Ford, which recently announced a global alliance with VW. If other manufacturers ally similarly, this will be radical as the other manufacturers who use the VW MEB could concentrate on body, electronics, infotainment and autonomous systems.
Conversely, the losses VW could potentially face would be staggering, in the unlikely event that the electric car market does not thrive. Furthermore, VW, with the huge market share, could be financially impacted on vehicle recalls. If VW can get other manufacturers under licence for the MEB, then it can mitigate and they would be huge or “huger”, not only in sales but in aftersales, service and spares.
Also, interestingly, each vehicle’s electronics and data could ascend into the VW 'Cloud' (VW is in partnership with Microsoft). Information could be stored there for updating applications and facilitating the transfer of performance information between owner, maker and service agents.
It is thought that VW cars on the MEB chassis will turn profitable by about 2021. This will be greatly assisted by the number of hours to build a typical electric vehicle being reduced by a whopping 35 per cent from that of a combustion model. A VW spokesman claims a typical car currently takes 26-32 factory hours to build, but the MEB system will take only 16. VW says it plans to reduce this further to 10 hours, resulting in their being able to offer a model by 2023 for an estimated USD20,000. Right then, where’s the number of my stock broker in Frankfurt?