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Volkswagen (VWAGY) to Develop China-Specific EV Platform

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Volkswagen (VWAGY - Free Report) announced its plan to develop an all-new platform for entry-level electric vehicles (“EVs”) in China and source components from local suppliers to reduce costs. The platform will help the automaker regain its lost position in the world’s leading auto market.

Per Ralf Brandstaetter, chairman and CEO of Volkswagen Group China, the new platform, named Main Platform, will be crafted to meet the specific requirements of Chinese consumers with regard to the battery, electric drive and electric motor. He added that the new car buyers in China are younger, tech-savvy and like an immersive digital experience from their cars.

The platform will be derived from the Modular Electric Drive Toolkit (MEB) and will be ready for the market by 2026.

The automaker plans to launch around 10 EV models globally by 2026. It also plans to minimize its time to market for new models from 4 years to 2.5 years, which is an average for its Chinese counterparts.

Per Brandstaetter, the Chinese market is price-sensitive and the automaker needs to optimize costs.

Per Ludger Luehrmann, chief technology officer of Volkswagen Group China, the company lowered the price of its dashboard displays by 37% by replacing its global supplier with a Chinese supplier.

Last year, Volkswagen lost China’s best-selling car brand title to BYD because of fierce competition with local car manufacturers and its high dependency on gasoline vehicle sales, which has been declining in the market.

Per industry data, after offering a massive discount on the ID.3, Volkswagen was able to achieve monthly sales of 10,000 from July to October, up from 2,200 per month last year.

Per Brandstaetter, the automaker aims to develop four models in the price range of ¥140,000 and ¥170,000 on the new platform to compete with its rivals. The cars will be produced by Volkswagen’s joint ventures with SAIC and FAW.

The automaker is trying to improve the efficiency of its development processes and reduce the time taken to bring products to Chinese customers by 30% without any compromise on customers’ specific needs.

Zacks Rank & Key Picks

VWAGY currently carries Zacks Rank #4 (Sell).

Some top-ranked players in the auto space are Volvo (VLVLY - Free Report) , BYD Company Limited (BYDDY - Free Report) and Toyota Motor Corporation (TM - Free Report) , each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The EPS estimate for 2024 has increased by 24 cents in the past 30 days.

The Zacks Consensus Estimate for BYDDY’s 2023 sales indicates year-over-year growth of 160.2%. The EPS estimate for 2023 has increased by 62 cents in the past 60 days. The EPS estimate for 2024 has increased by a penny in the past 30 days.

The Zacks Consensus Estimate for TM’s 2023 sales and earnings indicates year-over-year growth of 11% and 45.4%, respectively. The EPS estimates for 2023 and 2024 have increased by $2.37 and 13 cents, respectively, in the past 30 days.

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