Volkswagen Struggles to Keep Pace in the Electric Car Race, Losing Ground to Tesla and Chinese Competitors

Volkswagen, once poised to lead the electric vehicle (EV) market, is facing significant challenges as it falls behind Tesla and emerging Chinese competitors. Initial ambitions to become the top manufacturer of battery-powered vehicles by the mid-2020s have not materialized, with the Volkswagen Group, including Audi and Porsche, selling less than half of Tesla’s 1.31 million EVs in the US last year.

Moreover, Volkswagen is losing ground in its crucial market, China, where it has been the top-selling car brand for years. The company now faces stiff competition from local electric rival BYD, with concerns that it may relinquish its leading position.

Volkswagen’s struggle in the EV market is reflected in a forecasted 7% decline in sales volumes in China, while the overall EV market is expected to grow by more than a quarter in 2023. The company currently holds the eighth position in China’s expanding electric car market, with just a 3.3% share, trailing behind BYD (25%) and Tesla (15%).

Investor enthusiasm waned as Volkswagen’s execution fell short of its ambitious plans, leading to a stock decline of 14% this year. The company’s costly internal admission that its flagship brand is “no longer competitive” due to high costs and low productivity further added to its challenges.

Volkswagen is now engaging in discussions with employees on cutting €10 billion ($10.8 billion) in costs to enhance efficiency. However, skepticism remains about the company’s ability to navigate the rapidly evolving EV landscape.

The legacy of the “Dieselgate” scandal in 2015 continues to cast a shadow on Volkswagen’s trajectory. The compliance overcorrection following the scandal has made the company cautious and slower in adapting to the fast-paced EV market.

Despite setbacks, Volkswagen remains a major player with global brand recognition and extensive resources. The company is banking on its ambitious battery strategy, including investing in battery production, to reduce costs and increase competitiveness.

However, industry experts suggest that Volkswagen needs to close the technology gap, particularly in software development, and address issues with flagship EV models like the ID.3 to regain momentum. While challenges persist, Volkswagen aims to become a significant player in North America and bounce back in the EV race, leveraging its global presence and diverse brand portfolio.