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Volkswagen Receives Good News That Threatens Tesla's Throne

The German manufacturer's brands like Porsche have many electric models that appeal to consumers.
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Last week the "Hippie Bus" was brought back to life.

Volkswagen's Microbus, once the preferred mode of transportation for Sixties counterculture types who didn't trust anyone over 30, has been jolted into the 21st Century as the electric ID. Buzz van.

What's the Buzz?

The German automaker, which unveiled the vehicle in Paris, said the ID. Buzz van is due to go on sale in a number of European countries in the third quarter of 2022. The van will also launch in the United States in late 2023.

Volkswagen's EV investment is clearly paying off. 

On Tuesday the company said that several of its battery-electric models have already sold out for 2022. Arno Antlitz, Volkswagen Group's chief financial officer, said even the automaker was surprised by the sales figures.

“Originally, we thought it takes two to three years until we see the margin parity of ICE and battery electric vehicles," he said, referring to internal combustion engines. "The main factor is that our battery electric vehicle margins are much stronger already today than we thought three or four years ago."

Antlitz added that "we see better scale, we see better margins, we see a high customer demand."

"Some EVs are already sold out for the whole year of 2022 or have a pretty long lead time," he said. "We have scale."

Antlitz said Volkswagen "is ramping up our companies, our factories in Europe."

2024 Volkswagen ID Buzz Electric Microbus Lead JS

Ramping Up

"We are ramping up the MEB, the platform, on a global basis. We're ramping up in Chattanooga, we are ramp-ing up in two factories in China, which leads to a global scale in terms of R&D."

In terms of margin and in terms of scale, Arno said, "we are very well underway on our battery electric business."

Earlier this year, Volkswagen said it will expand its plant in Chattanooga and create 1,000 jobs there as the factory gears up for electric vehicle production beginning in 2022.

The Chattanooga plant produces the midsize Atlas SUV and Passat sedan and will begin building the Atlas Cross Sport, a five-seat version of the model, this year.

In addition, Volkswagen is close to deciding whether to build an electric pickup truck in the U.S., the Wall Street Journal reported. 

The company sees gains made by Rivian Automotive  (RIVN) - Get Free Report and excitement caused by Tesla's  (TSLA) - Get Free Report planned Cybertruck as a sign that there might be room for more electric models in the U.S truck market, the Journal reported, citing people familiar with the company's plans.

"The automotive industry is ramping up their launch of EV models and consumers are responding," said Gregory A. Keoleian, a civil and environmental engineering professor at the University of Michigan. "There is a clear advantage from lower operating costs when charging with electricity over fueling with gasoline. This advantage is even more heightened with current gasoline prices."

9. 2016 Porsche 718 Boxster

Stay on Track

Volkswagen and other automakers are facing some significant challenges, including global supply chain problems brought on by the Covid-19 pandemic.

Metals, such as aluminum, along with the nickel and lithium used in batteries are becoming increasingly more expensive.

And then there's Russia's ongoing invasion of Ukraine, which has shuttered factories that produce wiring harness, which are needed for organizing vehicle cables.

Up to 15% of of European auto production could be at risk because of shutdowns at wire-harness factories, Wells Fargo analyst Colin Langan said in a report.

Langan said the closing of the harness factories may lower output by as much as 700,000 vehicles in the first and second quarters. 

He added that lost production could potentially be recouped later in the year.

Volkswagen Group CEO Herbert Diess warned that delays in supplies of wire harnesses could force Volkswagen to revise its outlook for 2022, if alternative sources are not found in three to four weeks.

In response, Volkswagen is moving production of the harnesses to north Africa and eastern Europe.

Antlitz said that over the past two years, Volkswagen has learned to "better mitigate the impact of crisis on our company."

"I am confident that we will make the best possible use of these experiences to stay on track in these difficult times," he said.