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Tesla Faces Squeeze as Volkswagen Invests $800 Million in US Electric Car Plant

Last Updated
Samantha Chang
Last Updated

Tesla is under pressure now that Volkswagen, General Motors, and Ford ratcheted up their electric-car game. With these automobile juggernauts fighting for domination, competition in the electric vehicle field has never been fiercer.

On Jan. 14, German automaker Volkswagen announced plans to invest $800 million to expand an electric vehicle (EV) plant in Chattanooga, Tennessee.

The manufacturing facility will create 1,000 new jobs, and is expected to roll out its first EV in 2022, Volkswagen announced .

Volkswagen Targets 1 Million Sales a Year

Herbert Diess, chairman of the Volkswagen brand, poses with the I.D. Buzz all-electric concept van, at the North American International Auto Show, in Detroit. AP Photo/Tony Ding.

Volkswagen has also set an ambitious goal of selling one million electric cars a year by 2025.

By comparison, Tesla delivered a total of 101,312 vehicles in 2017. That’s a 33 percent increase from 2016.

Despite the progress, Tesla and its CEO Elon Musk have been under fire for repeatedly missing production deadlines.

GM Plans Luxury Electric Cadillac

Cadillac’s Electric Concept Car. Image from Cadillac.com.

Moreover, Tesla faces mounting competition from General Motors, which plans to launch an all-electric Cadillac, as CCN.com reported.

After cutting costs and exiting the unprofitable European auto market, GM revised its 2019 earnings projections upward.

General Motors now expects to earn $6.50 to $7.00 a share — well above Wall Street expectations of $5.86.

Ford to Invest $11 Billion in Electric Cars

Meanwhile, Ford is investing $11 billion to make electric cars by 2022, CNBC  reported.

While Tesla has three EV models (the Model X, Model S, and Model 3), Ford plans to eventually have 40 hybrid and fully electric vehicles in its lineup.

“We talked about a huge investment in electric vehicles,” says Ford CEO Jim Hackett.

“We have 16 models that are in design and development. We have a pretty big surprise coming next year.”

Elon Musk on Competition: Bring It On!

While most CEOs would be annoyed by the idea of such stiff competition, Elon Musk wholeheartedly welcomes it.

“The whole point of Tesla is to accelerate the advent of electric vehicles,” Musk told “60 Minutes” in December 2018 (see video).

If somebody comes and makes a better electric car than Tesla and it’s so much better than ours that we can’t sell our cars and we go bankrupt, I still think that’s a good thing for the world.

Tesla Stock Remains Curiously Anti-fragile

If billionaire Musk doesn’t sound particularly worried about Tesla, perhaps it’s because he has other concerns.

SpaceX — the rocket company Musk founded — is laying off 10 percent of its 6,000-employee workforce. The layoffs are part of a plan to slash costs and streamline the business.

SpaceX president Gwynne Shotwell said the action was necessary due to the “extraordinarily difficult challenges ahead.” The company is offering the fired workers a minimum of eight weeks’ pay and other benefits.

For all the bearish talk about SpaceX and Tesla, Tesla’s stock hasn’t suffered much. On Monday (Jan. 14), TSLA closed at $334.40, down 3.7 percent. Despite the dip, Tesla shares are still up over a five-year time horizon.

Tesla TSLA stock price jan 14
Chart from Yahoo.

Featured image from Shutterstock.