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Why VW CEO’s Comments About Tesla are So Crucial

It is not often that competitors compliment each other in the auto industry, but it looks like Tesla and Volkswagen are doing just that.  After a tweet last month by Tesla CEO Elon Musk praising the progress Volkswagen is making in electrification, Volkswagen CEO Herbert Diess returned the favor last week when he admitted that Tesla is a serious rival.  With Volkswagen naming Tesla as a major competitor for the electric car market, perhaps other legacy automakers will soon admit that Tesla is no passing fad.

Volkswagen Names Tesla As Serious Competitor

It all went down last week at VW’s official presentation of the new Golf Mk8, where reporters commented that Tesla is in trouble because of its small size while engaging with Diess.  Diess was quick to rebuke such a notion.  “Tesla is not niche,” Diess said during the German press conference. “The Model 3 is a large-series model and they are one of the biggest manufacturers of electric-car batteries.”

He did not stop there.  “We have a lot of respect for Tesla,” he said later. “It’s a competitor we take very seriously.”

Volkswagen’s CEO pushed on to acknowledge that Tesla’s global expansion is likely going to face challenges.  It all hinges on whether or not capital markets will keep pumping money into the company to fund its growing operations.  “Scaling up globally is difficult,” Diess said. “The car industry is very capital intense, and electric cars make it even more capital intense.”

Diess’s comments came on the same day that Musk announced the quarterly profit report for Tesla, after which the good news sent Tesla stock soaring by 18 percent.  That is the biggest jump Tesla stock has seen in over six years. 

“For What It’s Worth, He Has My Support.”

While it is not certain, the praise may have been in response to a comment Musk made last month on Twitter, after Diess faced renewed scrutiny regarding Volkswagen’s four-year-old ‘Dieselgate’ scandal. 

“Herbert Diess is doing more than any big carmaker to go electric. The good of the world should come first,” Musk tweeted. “For what it’s worth, he has my support.”

Volkswagen’s Electrification

Volkswagen has come a long way since the dark days of 2015 when it found itself firmly entrenched in the Dieselgate scandal after deliberately distorting emissions tests on their diesel engines.  Volkswagen appears determined to move past the disgrace by investing a lot of enthusiasm and money into the electric car revolution.  The German automaker plans to ramp up production of electric vehicles to 22 million over the next ten years and reduce its carbon footprint over the life cycle of its vehicles by 30 percent. 

VW has also developed a modular all-electric platform (or MEB), which should power dozens more cars and SUVs across the Volkswagen family of brands.  This will allow for the mass-production of long-range, all-electric vehicles that will be hitting the market starting next year.

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