Volkswagen, Tesla Power Ahead In The Race Toward EV Affordability: JATO Dynamics

Last month, JATO Dynamics' released its latest report 'EVs - A pricing challenge 2021', exploring the impact of government incentives on the electric vehicle (EV) market over the past decade. The report also offers a deeper dive into China's approach to EVs, and the OEMs most prepared for the shift away from the industry's dependency on incentives.

The report found that government-led incentivisation has been a driving factor in EV uptake over the last decade, acting as a vital support for the automotive industry to offset the price gap between traditional cars and EVs. Alongside this, the rising environmental agenda has also been a key consideration, leading many countries towards incentivisation schemes - such as Germany's 'Umweltbonus', the UK's 'Road to Zero' electrification strategy, and the bonus-malus scheme in France. However, in China, the country's problem with air pollution has been the primary reason that its central government invested heavily into EVs.

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Findings from the report showed that Tesla and Volkswagen are taking clear steps to reduce production costs and improve profitability. Tesla is on target for two production plants alone to produce a combined 900,000 units by the end of the year - which is 86 per cent of Tesla's current annual production capacity. The company is also seeing increases to its profitability, and in Q1 2021, its earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 94 per cent compared to the same period in 2020. This provides good indication that Tesla will soon be ready to enlarge its product line-up and take steps towards launching more affordable EVs.

Volkswagen is accelerating its electrification plans with the introduction of several new EVs. The ID family in particular is known for its range of electric models across varying segments, which appeal to a broad base of consumers. Currently the world's top-selling OEM for small, subcompact and compact vehicles, VW sold almost 6.5 million units in 2020. This demonstrates how well positioned it is to make moves into popular EV segments - and the company already has plans to unite its platforms into a Scalable Systems Platform (SSP). This singular electric vehicle platform has the aim of unifying VW's product portfolio into one comprehensive platform that includes all car types.

David Krajicek, CEO at JATO Dynamics, said, "The EV market continues to rapidly grow, especially as the environmental crisis climbs only higher on the agendas of governments, businesses, and consumers alike. As countries start to roll back their incentive programmes, manufacturers in the US and Europe should look to China's lead and find avenues to reduce production costs, if they are to remain competitive in this space."