Last Week's EV Updates Were All About Electric Alliances

Last week, Tesla Inc TSLA knocked on India’s door with meetings regarding the construction of its factory. Volkswagen AG VWAGY has made, what many believe to be, a game-changing partnership with its Chinese EV rival, XPeng XPEV, easing concerns that its EV progress has begun to stall. Stellantis STLA, the final member of the "Big Three" that still hasn't revealed any intentions to adopt the Tesla charging  standard, has teamed up with other prominent automakers, including General Motors GM and Honda HMC, to establish EV charging services across the United States and challenge Tesla’s dominance.

Volkswagen Has Its Eyes Set On The China EV Thrown

Automakers want the dynamism and innovative capabilities of Chinese EV makers and even the German auto giant is no exception. Under the electrified alliance agreement, Volkswagen will be investing approximately $700 million to get a 4.99% stake of Xpeng's outstanding share capital. Together with XPeng, Volkswagen plans to develop two B-class EVs for the Chinese market. Both companies are also considering collaborating on future EV platforms, software technologies, and supply chain management.

Easing Concerns Of Hampered EV Progress

Last year, Volkswagen concerned investors with its slowing pace of EV growth as BEV sales grew only 26% YoY. Although Volkswagen accelerated its growth from 2022, the pace was  still anemic compared to its prior results and more importantly, below its own expectations. For 2023, Volkswagen guided for nearly1 million in BEV deliveries, with BEVs making about 11% of total automotive sales. Until the end of June, it made only 321,600 deliveries which was a clear sign things aren’t going as planned on the EV front. Although its European status remains strong, Volkswagen is struggling in China, with a rare bright spot being its ID.3 model. As a result, Volkswagen had no choice but to announce production cuts at its German plant on July 6th, followed by lowered full year targets during its second quarter earnings report that was published on July 27th.

Latest Results Were Mixed

For the first half of 2023, Volkswagen saw its after-tax earnings melt by 20%, to $9.45 billion (8.5 billion euros). Volkswagen did reaffirm its financial outlook for the year as it taking steps to strengthen its position in China. Turnover increased 18.2% but sales in China alone contracted 1.2%. Although the full year earnings outlook was maintained, the guidance for deliveries was lowered from 9.5 million to a range between 9 million and 9.5 million vehicles. During the first half of the year, Volkswagen sold 4.4 million vehicles, translating to a 13% YoY rise owed to strong performance outside China, the world's greatest EV and automotive market, with non-China sales rising 21%.

Volkswagen Is Engineering An EV Rebound

It is more than clear that even Volkswagen is finding its electric transformation to be more challenging than it anticipated. But, with XPeng who will undoubtedly help Volkswagen reengineer its China positioning and EV approach, it might have a shot of realizing its long-term goal of challenging Tesla and possibly leading the global EV market.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.