Volkswagen Will Love This New Report And Tesla Will Hate It

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Assuming the report's predictions come true.

The auto business has always been tough. So many things can go wrong, such as supplier network issues, labor relations, and economic slowdowns. There are also government emissions and safety regulations automakers must abide by. Now we must factor in the transition from internal combustion to electrified vehicles. To date, no automaker - including Tesla - has earned money from manufacturing and selling electric vehicles. Granted, it's still relatively early in this electrified era, but not earning a profit is never good. However, it appears one automaker is set to actually make money selling battery-electric vehicles.

A new report by Swiss investment bank UBS predicts Volkswagen will begin earning profits from its new EV lineup beginning in 2022. GM, which just held an EV Day last week, declared it too will make a profit with its future EVs but failed to say when exactly.

Front Angle View Volkswagen
Rear Angle View Volkswagen

VW, however, appears to be in a stronger position. UBS predicts VW will begin earning money selling EVs before any of its competitors. Although VW hopes that by 2025 some 25 percent of its global sales will come from EVs, the report predicts this figure to be 15.6 percent. Again, this is merely a prediction but VW's investors will surely take note. Furthermore, UBS's outlook for plug-in hybrid vehicles is far from ideal. By 2025, PHEVs could account for just 1.4 percent of global sales.

Why? Because EU regulators prefer pure EVs due to their lack of a combustion engine. Tesla was also mentioned in this report's forecast as the most favored electric car brand, at least for now. The Tesla Model Y and Tesla Cybertruck currently have a lot of buzz, but this could die down.

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"In a head-to-head comparison, consumers would still prefer an electric Audi, BMW or Mercedes over a Tesla. The key issue is that these brands still lack competitive products, which could change in 2021," the UBS report said. In the coming months, the Volkswagen ID.3 will go on sale in Europe and other overseas markets though a previous report claiming production problems could cause delays. The North American market Volkswagen ID.4 crossover is scheduled to debut in the coming weeks. But the bottom line is that UBS believes the ID.3 will be profitable for VW.

"A winning EV is a combination of an acceptable range - 280 to 310 miles - at a price point roughly on par with equivalent conventional cars, as proven by Tesla's success. We think VW is the first global incumbent (manufacturer) to deliver such product and hereby climb the scale curve fast. Consequently, VW should be the first incumbent to make money with BEVs. Premium (manufacturers) lack scale in BEVs and are unlikely to close the technology/performance gap to Tesla soon, which bears the risk of unprofitable EVs and the loss of market share," the report said.

2021 Tesla Model Y Front View Tesla
2021 Tesla Model Y Rear View Tesla
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Source Credits: UBS

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