Forget NIO NIO,
XPeng XPEV,
and other vehicle electronic stocks, because within the next four years Volkswagen VOW,
competing with Tesla TSLA,
for the crown of most EV sales worldwide, according to UBS.
The Swiss bank recently increased the forecast for the speed of adoption of electric vehicles, and they are now predicting that EVs will enter 100% of the car market before 2040. That makes the battle the top car manufacturer worth hundreds of billions of dollars.
UBS UBS,
Analysts said in a call with members of the media on Tuesday that they predict that, within the next few years, Tesla and Volkswagen will become two global leaders in electric vehicle sales. Analysts expect Volkswagen to take over Tesla in terms of car sales as early as next year, when the two companies could deliver around 1.2 million cars.
Volkswagen Group is a German car giant that owns brands such as Audi, Porsche, Bentley, Bugatti, and Lamborghini. In the past year, the company has raced past Tesla to become the strongest electric vehicle group in Europe – the world’s largest EV market behind China. Volkswagen controls between 20% and 25% of the market share in this key segment.
Read also: Buy these 3 battery stocks to play the electric party, but stay away from this company, says UBS
The German group also provides a model for legacy carmakers looking to gain access to electric vehicles, with UBS naming Volkswagen as the “best EV movement story” in the global car manufacturing space.
“We believe now is the time to be a total car manufacturer,” UBS analyst Patrick Hummel said Tuesday. “It’s about getting scale as fast as possible, because scale is going to be profitable.”
UBS estimates that, by 2025, there will be a manufacturing cost ratio between electric and nonelectric vehicles, compared to a $ 5,000 cost difference in 2020 for more expensive EVs. The average operating rate for EVs should grow to 7% by then, from 1% in 2020 – which means that there will be a margin parity between EVs and conventional cars within the next four years.
UBS analysts raised their target price for Volkswagen stock on March 2 from € 200 ($ 237) to € 300. With the shares trading Monday at around € 191, the Swiss bank estimates that the stock has legs that would climb 57% higher in the next 12 months.
Plus: Tesla’s market share in Europe continues to decline, as China reports on the leading position in the global EV race
The main area that Volkswagen is leading Tesla on, according to UBS, is that it has the best scalable EV platform.
“We use the symbolism from the tech space, Tesla announces the Apple AAPL,
of the future mobile space, due to a well-known piece of hardware in conjunction with an advanced software ecosystem, ”Hummel and other analysts wrote in a report on 2 March.
“Volkswagen is well placed for a value proposition like Samsung 005930,
– a trusted global brand for its high-quality, scale-out hardware. This doesn’t get VW to Tesla’s valuation areas, in our opinion, but it still offers an upside down from here, ”they said.
Tesla continues to lead Volkswagen in a few critical technical areas, according to UBS. The most relevant long-term lead is in software, but Tesla is also outlining Volkswagen with its integrated electric powertrains, “ruthless engineering,” digitization, and autonomous driving features, the UBS analysts.