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article imageVolkswagen just ordered $48 billion in electric car batteries

By Karen Graham     May 3, 2018 in Business
A few hours after Elon Musk berated analysts for what he perceived as unimaginative questions, Volkswagen AG said it was writing a check for batteries that almost match Tesla’s entire market value.
Volkswagen has awarded 40 billion euros ($48 billion) in contracts to battery producers, doubling what was announced a few weeks ago. This latest deal brings the German automaker within striking distance of its target of locking down 50 billion euros in supplies.
Chief Executive Officer Herbert Diess told investors on Thursday in Berlin that by 2025, Volkswagen plans to sell as many as 3.0 million all-electric vehicles a year.
Bloomberg News notes that while Tesla's Elon Musk is finding himself pushed into a corner, putting him on the defensive over the company's finances, Europe's more established automakers, like Volkswagen, Daimler, and BMW are already pushing aggressively into Tesla's niche.
So it's easy to see how Volkswagen makes more cars in four days than Tesla makes in a year. And to Volkswagen's credit, it has taken the bull by the horns, harnessing it's immense financial and engineering firepower to make up for the self-inflicted losses caused by the dieselgate scandal.
“I could not be more bullish on German premium Luxury business,” Mike Jackson, CEO of U.S. dealership chain Autonation Inc., said on a conference call this week. “They have the best pipeline I’ve ever seen.”
Volkswagen's newly-appointed CEO Herbert Diess aims to drive automaker out from the cloud of th...
Volkswagen's newly-appointed CEO Herbert Diess aims to drive automaker out from the cloud of the 'dieselgate' scandal
Volkswagen has a grand plan
According to Diess, Volkswagen plans to offer customers more than 25 new electric models and more than 20 plug-in hybrids by the end of 2020. “In just a few years’ time, then, across all brands and regions, we aim to put the world’s largest fleet of electric vehicles on the road," said Diess.
And as carmakers start rolling out their electric models, Diess says it is time that talks be restarted to establish manufacturing of battery cells in Europe to meet what is already a growing demand.
Robert Bosch, the world’s largest car-parts maker, decided against starting its own battery cell production facility earlier this year citing high investment demands.
Back in March this year, Bosch said it had dropped earlier plans to produce its own battery cells, saying that the billions of euros of investment required would be too risky. according to Deutsche Welle. "Given dynamic external market forces that can only be predicted with difficulty, it's unclear whether this investment would pay off for Bosch, and when," the firm said in a statement.
German titans Volkswagen  BMW and Daimler all announced far-reaching electric vehicle programmes in ...
German titans Volkswagen, BMW and Daimler all announced far-reaching electric vehicle programmes in the run-up to the IAA
Germany has become the biggest market for EVs
Actually, Germany knocked Norway out of first place in European electric car sales in the first quarter of this year, EV sales in Germany surged 70 percent in the first quarter, with 17,574 electric cars being sold. The figures include fully-electric cars like Tesla’s Model S, as well as plug-in hybrids such as the BMW 2-Series Active Tourer.
The surge in electric and hybrid vehicles has been helped along because of Europe's strict regulations on combustion engines, while in Germany, consumers are turning their backs on diesel. This has led carmakers like Volkswagen and others to hope consumers will embrace electrified powertrains if they are to recoup the massive investments they’re making.
German carmakers are now looking to U.S. and China markets for their electric cars, wanting to prove to consumers their products are superior. And with Tesla's less-than-stellar Model 3 quality reviews, they may have opened a door.
“Tesla’s golden age is nearing its end and it will become a product among many,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “As the consumer pool for electric cars grows, tolerance over quality issues may be lower too as it’s less about the early adopters who went for Teslas based on novelty.”
More about Volkswagen, battery manufacturing, Europe, Tesla, Daimler
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