VW - A Tesla alternative that pays a dividend?

[dspp]

VW has launched it's first purpose built electric car. The ID.3. Apparently, pre-orders are incredible and from young people too. The shares are down quite a bit from their 2015 highs, have a low PE and a decent yield with very good cover. This is a snippet from today's FT -

Volkswagen’s first purpose-built electric car, the ID.3, has attracted tens of thousands of pre-orders from younger customers new to the VW brand as its plan to overtake market pioneer Tesla picks up pace.

Interesting, I thought. While Tesla is maybe years ahead technically, if anyone can turn around the European market from IC engines to electric from within, it's VW. From Skoda, Seat through Porsche to Lamborghini, Isn't it?

RVF

Or Nissan-Renault, who have finally accepted liquid cooling and CCS connectivity, see viewtopic.php?p=327695#p327695

VAG still haven't figured out how to do OTA software updates, hence ID3 vehicles piling up unsold, such that they effectively demoted the CEO, https://www.autocar.co.uk/car-news/new- ... blems-pile

Even if trad-auto get their act together on BEV it is unclear whether one can put a higher valuation on them than they have at the moment, as a decent BEV from them immediately obsoletes the other 95% of their production.

Tricky.

regards, dspp

[dealtn]

Even if trad-auto get their act together on BEV it is unclear whether one can put a higher valuation on them than they have at the moment, as a decent BEV from them immediately obsoletes the other 95% of their production.

Not sure its as soon as "immediately" to be honest. I would prefer a non-BEV with range and quick recharging/refuelling etc. for instance.

5% with a series of positive cashflows for multiple years, 95% with such cashflows for 5 years, and a gradual (or even accelerated) switch in those proportions might be valued higher by the market than currently.

[Adamski]

Its a beautiful looking car but so expensive! £36k for basically an electric golf, compared to £24k for a standard petrol golf (with an efficient engine). The Telsa (cheapest) model 3 is £37k so a similar price to the VW version. I just can't see electric cars dominating the market at those prices.

[Wizard]

Just before Covid we were looking seriously at an EV for my wife. In the end we decide that if we did get one it would have tombe a Tesla, not because of the car itself but because of their Supercharger network. IMHO no other EV in the UK has a fit for purpose charging network at its disposal. In terms of vehicles the new Polestar 2 has been getting some very good reviews, part of Volvo so owned by Chinese firm Geely.

[Arborbridge]

Its a beautiful looking car but so expensive! £36k for basically an electric golf, compared to £24k for a standard petrol golf (with an efficient engine). The Telsa (cheapest) model 3 is £37k so a similar price to the VW version. I just can't see electric cars dominating the market at those prices.

I don't see it making any sense to buy such a car at the moment except as a fashion statement. Once more, it seems young people have more money than sense - and no doubt will then be complaining that they cannot make ends meet.

Grumpy old man mode

[tikunetih]

VAG still haven't figured out how to do OTA software updates, hence ID3 vehicles piling up unsold, such that they effectively demoted the CEO, https://www.autocar.co.uk/car-news/new- ... blems-pile

Nearly a decade ago Marc Andreessen famously wrote that "software is eating the world", and it is and will continue to do so, until software is the heart and essence of most major businesses.

The problem that incumbents have is that software is rarely if ever "in their DNA", and it needs to be else they always stumble because their people do not "get" software sufficiently well to make the transition to it being the most important aspect of their mission as a business.

I've observed this numerous times across sectors as previous market leaders stumbled as they wrestled, unsuccessfully, with this issue. I don't think it's impossible for legacy incumbents to assimilate software into their corporate DNA but it is a very difficult and error-prone journey to successfully navigate. As can be seen here.

[csearle]

Moderator Message:
Guys, the OP was focussing on the investing benefits of main car manufacturers over Tesla given that they could learn from Tesla's approach. Please stay on-topic. If you wish to discuss cars in general please do so on Cars, Driving, Motorbikes or any Transport. Thanks - Chris

[Wizard]

Just before Covid we were looking seriously at an EV for my wife. In the end we decide that if we did get one it would have tombe a Tesla, not because of the car itself but because of their Supercharger network. IMHO no other EV in the UK has a fit for purpose charging network at its disposal. In terms of vehicles the new Polestar 2 has been getting some very good reviews, part of Volvo so owned by Chinese firm Geely.

Apologies, in light of the (wholly correct) point from Chris I would like to clarify my post.

The point I was trying to make is twofold. First, in the UK I would not bet against Tesla unless the other manufacturers can get their act together on the charging networks, my guess is that this is no different in many other markets around the world. It somewhat reminds me of VHS / Betamax where Sony focussed on the technology in the machine itself and not the user experience. Second, in the ongoing rush for EVs there are new models popping up all over the place which can move the goal posts, without a very clear understanding of the pipeline of each manufacturer it is hard to take a view on the likely winners and losers IMHO.

As an aside it seems the Polestar 2 has a very good infotainment system, because they have handed the design over to Google. As Polestar is ultimately Chinese owned I wonder what impact US / Chinese trade tensions might have on such an approach.

[dspp]

Just before Covid we were looking seriously at an EV for my wife. In the end we decide that if we did get one it would have tombe a Tesla, not because of the car itself but because of their Supercharger network. IMHO no other EV in the UK has a fit for purpose charging network at its disposal. In terms of vehicles the new Polestar 2 has been getting some very good reviews, part of Volvo so owned by Chinese firm Geely.

Apologies, in light of the (wholly correct) point from Chris I would like to clarify my post.

The point I was trying to make is twofold. First, in the UK I would not bet against Tesla unless the other manufacturers can get their act together on the charging networks, my guess is that this is no different in many other markets around the world. It somewhat reminds me of VHS / Betamax where Sony focussed on the technology in the machine itself and not the user experience. Second, in the ongoing rush for EVs there are new models popping up all over the place which can move the goal posts, without a very clear understanding of the pipeline of each manufacturer it is hard to take a view on the likely winners and losers IMHO.

As an aside it seems the Polestar 2 has a very good infotainment system, because they have handed the design over to Google. As Polestar is ultimately Chinese owned I wonder what impact US / Chinese trade tensions might have on such an approach.

Thanks, in Europe, I don't see the French or Italian manufacturers being market leaders in EV, except in their domestic markets perhaps. But VW has the critical mass I think to take the lead in Europe. In fact I'd say if they get really serious they have a golden opportunity here. The market will consolidate, it already is doing, Fiat + Chrysler, Nissan + Renault and others around the globe. I think Nissan's early lead with the Leaf will erode in the face of serious competition from VW. And as a bonus, which was one part of this thread, there's every chance of a decent dividend from VW shares while you watch the transformation take shape. Maybe some capital growth too medium term.

RVF

1. You do realise that the Nissan Leaf and the Renault Zoe are the same underlying BEV platform just with different skins and some different monobox packaging ? The clues are in the battery cooling system (air cooled), and also in pack sizes and motor locations, but they have said this publically as well (https://www.greencarreports.com/news/11 ... -in-future)

2. Nissan+Renault approximately equals VAG in numbers of BEV sold, but both are substantially behind Tesla in MWh/year of batteries used. That means that Tesla by far and away has the lead in manufacturing economics. I have previously posted the data on this, both BEV/yr and MWh/yr. One observation from strip-downs that I have seen is that Tesla have a $4k cost advantage in the drivetrain alone vs some of their peer competitors such as the JLR BEV. This Tesla lead in BEV-cost appears to be increasing, not decreasing. (and that is ignoring the autonomy play). Also the Tesla advantage in design/launch costs appears to be growing - so far Tesla has issued $10bn of equity (most of which it has burnt through) but if you look around on the net I have seen figures of the order of $3-4bn that have VW have spaffed on individual programs like the eTron and the ID3 with basically only failures to show for it. And VW are one of the good ones !

3. It seems that the Tesla 3 and Y are passing below mfg cost parity with their peer dino-juice competitors, and also passing below the total-cost-of-ownership (TCOE) on the first-3-years alone to purchasers, even outside the big cities (where they are wildly ahead due to emissions/congestion/etc penalty exemptions). This means that from now on any dino-juice platform is going to be at an increasing cost disadvantage.

4. Ford, GM, FCA, Toyota, Honda, Mercedes, are all AWOL on the large-scale BEV front in any meaningful way.

Put these things together and it is difficult to make a numerical case for buying shares in any of the trad auto makers. I too have wondered about doing so in the case of Nissan+Renault, or VAG, but sucked my teeth very hard and couldn't get past these realities.

I will be very interested if someone can put the data and analysis together to show me if I am making an error.

regards, dspp

[Arborbridge]

Apologies, in light of the (wholly correct) point from Chris I would like to clarify my post.

The point I was trying to make is twofold. First, in the UK I would not bet against Tesla unless the other manufacturers can get their act together on the charging networks, my guess is that this is no different in many other markets around the world. It somewhat reminds me of VHS / Betamax where Sony focussed on the technology in the machine itself and not the user experience. Second, in the ongoing rush for EVs there are new models popping up all over the place which can move the goal posts, without a very clear understanding of the pipeline of each manufacturer it is hard to take a view on the likely winners and losers IMHO.

As an aside it seems the Polestar 2 has a very good infotainment system, because they have handed the design over to Google. As Polestar is ultimately Chinese owned I wonder what impact US / Chinese trade tensions might have on such an approach.

Thanks, in Europe, I don't see the French or Italian manufacturers being market leaders in EV, except in their domestic markets perhaps. But VW has the critical mass I think to take the lead in Europe. In fact I'd say if they get really serious they have a golden opportunity here. The market will consolidate, it already is doing, Fiat + Chrysler, Nissan + Renault and others around the globe. I think Nissan's early lead with the Leaf will erode in the face of serious competition from VW. And as a bonus, which was one part of this thread, there's every chance of a decent dividend from VW shares while you watch the transformation take shape. Maybe some capital growth too medium term.

RVF

1. You do realise that the Nissan Leaf and the Renault Zoe are the same underlying BEV platform just with different skins and some different monobox packaging ? The clues are in the battery cooling system (air cooled), and also in pack sizes and motor locations, but they have said this publically as well (https://www.greencarreports.com/news/11 ... -in-future)

2. Nissan+Renault approximately equals VAG in numbers of BEV sold, but both are substantially behind Tesla in MWh/year of batteries used. That means that Tesla by far and away has the lead in manufacturing economics. I have previously posted the data on this, both BEV/yr and MWh/yr. One observation from strip-downs that I have seen is that Tesla have a $4k cost advantage in the drivetrain alone vs some of their peer competitors such as the JLR BEV. This Tesla lead in BEV-cost appears to be increasing, not decreasing. (and that is ignoring the autonomy play). Also the Tesla advantage in design/launch costs appears to be growing - so far Tesla has issued $10bn of equity (most of which it has burnt through) but if you look around on the net I have seen figures of the order of $3-4bn that have VW have spaffed on individual programs like the eTron and the ID3 with basically only failures to show for it. And VW are one of the good ones !

3. It seems that the Tesla 3 and Y are passing below mfg cost parity with their peer dino-juice competitors, and also passing below the total-cost-of-ownership (TCOE) on the first-3-years alone to purchasers, even outside the big cities (where they are wildly ahead due to emissions/congestion/etc penalty exemptions). This means that from now on any dino-juice platform is going to be at an increasing cost disadvantage.

4. Ford, GM, FCA, Toyota, Honda, Mercedes, are all AWOL on the large-scale BEV front in any meaningful way.

Put these things together and it is difficult to make a numerical case for buying shares in any of the trad auto makers. I too have wondered about doing so in the case of Nissan+Renault, or VAG, but sucked my teeth very hard and couldn't get past these realities.

I will be very interested if someone can put the data and analysis together to show me if I am making an error.

regards, dspp

This is all quite interesting, for I've always thought of Tesla as a company that makes pie in the sky cars, not cars that real people buy. So what Tesla cars might I see? Are they maybe badged under some other name that I would know? From what you've written here, they could be almost commonplace. I can only remember seeing one Tesla and people were standing around looking at it, so presumably there are not all that many about. And I had the impression it is a company which makes many losses and keeps tapping shareholders for more - at least that's the background narrative in my mind.

An area of extreme ignorance for me, I'm afraid.

Arb.

[dspp]

This is all quite interesting, for I've always thought of Tesla as a company that makes pie in the sky cars, not cars that real people buy. So what Tesla cars might I see? Are they maybe badged under some other name that I would know? From what you've written here, they could be almost commonplace. I can only remember seeing one Tesla and people were standing around looking at it, so presumably there are not all that many about. And I had the impression it is a company which makes many losses and keeps tapping shareholders for more - at least that's the background narrative in my mind.

An area of extreme ignorance for me, I'm afraid.

Arb.

If you are in the UK and want to buy a Tesla from inventory go here : https://www.tesla.com/en_GB/inventory/new/ms

If you are in the UK and want to place an order for a factory-build go here : https://www.tesla.com/en_GB/model3

If you want to check out their financials go here : https://ir.tesla.com/investor-relations

This is four straight quarters of profit : https://ir.tesla.com/static-files/f41f4 ... 23b00475a6

I am not saying that TSLA as an investment is a low risk proposition. What I am saying is that the trad auto mfg companies now look even higher risk in many ways.

regards, dspp

[dealtn]

I am not saying that TSLA as an investment is a low risk proposition. What I am saying is that the trad auto mfg companies now look even higher risk in many ways.

...and priced accordingly perhaps.

That's the interesting (and fun?) thing about stock picking, it isn't just about who will win, who will be profitable, who will still be around etc. but just as much about the "price".

Sometimes you can double your money on the last remaining cash flows of a "dog", and sometimes you lose half your money on the successful company, that was perhaps priced for perpetual growth and success, that only delivered a "good" rather than a "stunning" performance.

[Howard]

Tesla isn’t selling many cars in Germany at the moment. They only sold 841 cars in June, (sales in Jan- Jun were 5,100).
VW sold 223,227 in Jan-Jun of which 7,300 were e-Golfs.

Teslas are selling well in China and California but aren’t achieving serious volumes in other markets except when there are large subsidies for BEVs.
They have achieved a 1.6% market share in the UK in 2020. Sales are surprisingly low at the moment given that if you drive a company car, BEVs are hugely subsidised by the UK Government.

It’s an interesting investment situation. Best to wait until we see the customer reaction to VW’s ID3 launch. Will the VW software excel or fail?

Regards

Howard

PS By coincidence today my BMW asked me when I wanted my OTA software update. So some German brands can do this.

sources for sales figures

https://www.best-selling-cars.com/germa ... nd-models/

https://insideevs.com/news/433885/germa ... car-sales/

https://www.smmt.co.uk/vehicle-data/car-registrations/

[Arborbridge]

£80000 for a BEV? One would have to be seriously rich, obsessed with the concept or deluded.

As an investment, I've no idea, but as a sound purchase such a car is a nonstarter (literally if you try to drive to far and can't find a charging point).

Arb.

[Wizard]

£80000 for a BEV? One would have to be seriously rich, obsessed with the concept or deluded.

As an investment, I've no idea, but as a sound purchase such a car is a nonstarter (literally if you try to drive to far and can't find a charging point).

Arb.

Tesla Supercharger network is very good, one of their USPs. People I know that have electric cars all do some sort of lease, just in case there is a massive leap in battery technology rendering their car worthless. As a company car in the UK it makes good sense with the BIK set so low for the next 3 years.

[Mike4]

VW has launched it's first purpose built electric car.

Let's hope they aren't lying about its emissions, again.

[Urbandreamer]

£80000 for a BEV? One would have to be seriously rich, obsessed with the concept or deluded.

As an investment, I've no idea, but as a sound purchase such a car is a nonstarter (literally if you try to drive to far and can't find a charging point).

Arb.

I'm curious. Which BEV are you talking about? I confess that I am aware that is about the price of the Porsche E-Performance electric sports car, but you don't say.

If we are to compare the Tesla S, it should be against a sports car from another manufacturer. Possibly a Porsche. If we are to compare Tesla the company, then we can't. None of the other car companies* make EV batteries.

Oh, by the way, a couple of other points.

1) £80000 is also about the price of the low end petrol Porsche sports car.
2) Porsche is owned by VW
....

E&T, the magazien for chartered engineers, has an article about a European road trip in a Tesla this month. They only once came close enough to not reaching their charge point to worry, though they did reach it.
https://eandt.theiet.org/content/articl ... nd-europe/

The route we’d planned would take us through five countries over a long weekend in late February, the idea being to see what the infrastructure is like for electric vehicles (EVs) in as many places as possible.

I should say that through SMT I have an investment in Tesla.

*Well actually there is a Chinese company that make both cars and batteries, but they make for the domestic market.

[Arborbridge]

VW has launched it's first purpose built electric car.

Let's hope they aren't lying about its emissions, again.

But are we all lying to ourselves about the emissions? Electricity generation, battery manufacture and whatever associated pollution there is....?
I'm not knocking EV's but I just wonder how much close examination goes in to some of these trends which are supposed to save the world of humans from themselves.

Arb.

[Urbandreamer]

VW has launched it's first purpose built electric car.

Let's hope they aren't lying about its emissions, again.

But are we all lying to ourselves about the emissions? Electricity generation, battery manufacture and whatever associated pollution there is....?
I'm not knocking EV's but I just wonder how much close examination goes in to some of these trends which are supposed to save the world of humans from themselves.

Arb.

Well us engineers, and those eco people who do their research are not.
https://eandt.theiet.org/content/articl ... conundrum/
Indeed there are many articles on the subject in this months mag.

I did go on, but was getting off topic for the board.

Oh, here are some more investment ideas on the subject of EV car manufacturers.

Tesla, Nissan, Mercedes, BMW are reusing their old batteries in electricity backup systems.
This works because EV batteries are considered unfit for EV use when they have 80% of life left.

Nissan and Mitsubishi are involved in a research initiative using EV's as local grid resources (V2G).
https://octopus.energy/blog/vehicle-to-grid/

They don't know if it can be managed so everyone makes money, hence the research. However it works with electric school buses in the US. Evidence seems to show that unexpectedly this does not reduce battery life.

[Arborbridge]

Well us engineers, and those eco people who do their research are not.
https://eandt.theiet.org/content/articl ... conundrum/
Indeed there are many articles on the subject in this months mag.

Thanks for that interesting read. When we hear about various "green" initiatives, one always wonders about how sound the research is behind it and whether all factors are truly accounted for. Nice to know there's some detailed thinking going on!

Arb.