Our goal is to use our industry expertise to help you, the client, make a more informed choice. We aim to give you condensed, relevant information, and to shed light on what you may need to know before making any decisions. Over the next couple of weeks we're focusing in on some of our core brands. In this edition, we take a deep-dive into the latest news from Volkswagen.
Lead times and microchips
Initially, Volkswagen seemed set to weather the storm of shortages of chips comparatively well. As part of the biggest automotive group in the world, their buying power, and group capacity, gave it an early advantage. VW also ended 2021 as the UK’s top-selling car brand, overtaking Ford for the first time.
However, fast-forward to 2022, and this positive outlook has evaporated, with even relatively quick-delivery cars, such as the all-electric ID.3, now being suggested to take 6-9 months for delivery. The outlook isn’t looking like a quick-fix for VW either. “The volatile situation will affect us at least beyond the first half of this year,” says Murat Aksel, the Head of Procurement for VW brand and purchasing for VW Group, although he added, it should ease slightly in the second half of 2022.
Discounts and pricing
Volkswagen have trimmed discounts, but not as severely as some of their German counterparts, where pricing has been affected by both inflationary pressures, and some models losing the plug-in grant in the UK. With demand projected to increase over the next 2 years, and pent-up demand returns as people move around more, we don’t see VW returning to high levels of discounting any time soon. That being said, residual values are stronger as a result, meaning lease remains almost universally the best-cost option for VW cars.
Models and Electrification
As the group also includes Audi, Skoda, Seat and Porsche, Volkswagen’s lead towards electric vehicles as the future has been critical in defining the path ahead. The model line-up is blossoming, with the VW ID.3 (think all-electric VW Golf) becoming Europe’s top-selling EV in 2021. They’ve added the ID.4, the ID.5, and now the ID. Buzz is creating waves as the all-electric replacement to the iconic VW campervan.
Strategy Snapshot
It is very much ‘all-in’ to the electric vehicle market for the VW Group Chief Executive, Herbert Diess. How quickly they can move their production of circa. 10 million cars to 100% electric is now the question, while guarding against what Diess acknowledges is a rising tide of threats from the new entrants to the market in the shape of Tesla, Rivian and other tech behemoths, such as Apple.
The share price of Tesla is one example of where the financial markets believe the smart money is, with Tesla reaching a peak market cap more than the next five biggest traditional car manufacturers combined in late 2021. This is more than just a matter of bragging rights.As an example, within one week in December, Tesla and Chinese EV-makers Nio and XPeng raised $9.7bn worth of capital by selling stock. Analysts have pointed out that the $5bn that Tesla raised was equivalent to about half of VW’s annual net cash flow.
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