Volkswagen takes the lead with electric vehicles
Shares of the German automobile giant
has fallen in the past three months over fears that production will be affected by the global shortage of semiconductors that control the electronic brains of its vehicles and by supply chain issues that will delay its parts.
The company behind Audi, Bentley, Porsche, Skoda and Seat saw its stock (ticker: VOW3.Germany) drop 16.2%, to 189.30 euros ($ 222.07), worse than its rival
(F), down 10%, and
(DAI.Germany), down 9.3%.
This drop could be a good buying opportunity, as optimism about VW’s progress in making electric vehicles could boost sales and lower costs.
Its Volkswagen ID.4 GTX, an electric sports utility vehicle priced at € 50,000, is seen as an effective rival for
(TSLA). At the Munich Motor Show this month, the Frankfurt-listed company unveiled a fully electric small car aimed at bringing these vehicles to the masses at affordable prices.
These advances will help VW achieve around 20% of its group sales from battery-electric vehicles, or BEVs, by 2025 and around 50% by 2030, according to the company’s own targets. Its six gigafactory construction project, implemented with partners such as Northvolt and Gotion, before 2030, will secure its battery supply and reduce costs.
Deutsche Bank analyst Tim Rokossa has a buy rating on the stock and says that “efficiencies in battery production through economies of scale should help reduce cell costs by more than 50% “. It has a target price of € 270.
Daniel Schwarz, analyst at Stifel Nicolaus, estimates that the stock could climb 66% to € 312. VW “is set to become the largest producer of electric vehicles in 2021,” he said.
VW expects by 2023 to reduce its fixed costs by 5% compared to 2020 levels, or 2 billion euros out of 40 billion euros, and aims to reduce its purchasing costs by 7% over the same period , according to Stephen Reitman, analyst at Société Générale. .
As the automotive market leader in Europe and China, VW operates 118 production plants in 30 countries. It has 662,000 employees and a market value of 122 billion euros. It hits a low multiple of 6.2 times this year’s expected earnings and is rated online with its peers.
Strong demand for VW’s premium brands – the company has managed to overcome chip shortages by directing supplies to its higher-profit vehicles – and the strong performance of its financial services division has helped achieve record results for the first half of the year. VW has also increased its outlook for 2021.
Profit before tax for the first half of the year was 11.2 billion euros on sales of 130 billion euros, compared to a loss of 1.4 billion euros and sales of 96 billion euros for the same period the previous year.
“We are maintaining our high pace, both operationally and strategically,” said CEO Herbert Diess in the half-year earnings release.
While deliveries of its electric cars have nearly tripled over the past year, sales of the ID.4 in China, VW’s most important market, have disappointed. “The rise of ID.4 is going well in Europe and the United States while the start in China has been rather slow,” says Rokossa of Deutsche Bank.
Stifel’s Schwarz attributes this to poor presentation in showrooms compared to the more lavish efforts of rivals Tesla and
(NIO), rather than fundamental issues with the vehicle.
Arno Antlitz, Volkswagen’s chief financial officer, said Barron in a statement that the company is “committed to developing a leading automotive software stack and will continue to invest in autonomous driving and mobility services.”