The legendary philosopher Lao Tzu once said ”there is no greater danger than underestimating your opponent" and Herbert Diess is clearly taking that to heart.
Volkswagen's CEO is going full tilt boogie in his efforts to catch up with Tesla (TSLA) in the hard-charging race to dominate the electric vehicle market.
'Moving Very Fast'
But Diess does not diss his opponent. Quite the opposite, actually, as he showed on June 1 while speaking at the CAR Symposium conference in Bochum, Germany.
The executive said that Elon Musk's outfit is “moving very fast, very focused" and added that Tesla's co-founder is “twice as fast as the rest of the industry.”
This isn't the first time that Diess has acknowledged Tesla's speed and agility. The executive said last month that "we didn’t expect our main US competitor to be so fast and well-prepared."
"It will be tight but we won’t give up on it," Diess said at the Financial Times Future of the Car 2022 conference. "I would still see a chance that by 2025 we are first. At least second.”
And the company recently sent out a love tweet to its Texas-based rival by declaring "@Tesla Model-Y don't we take a second to acknowledge how much you've done for the future of electric vehicles? #saysomethingniceday #drivebigger #driveelectric."
But Diess is being paid to push Volkswagen into the electrified future. After all, the guy wasn't named "Best CEO in the World" in 2018 by CEOWORLD Magazine just for making nice with his competitors.
As he said at Bochum, "there's a lot coming from our side too... a lot of momentum. It will certainly be tight in coming years."
During last month's shareholder meeting. Diess said he expects Volkswagen's electric vehicle business to be as profitable as its fossil fuel-burning cars sooner than planned.
The CEO said the company had previously expected to match its profit margins from combustion engine vehicles with electric vehicle sales in two to three years, but the company is able to make that happen sooner.
'Strengthened Our Resilience'
While Diess did not say when this would happen, he did maintain that "through good crisis management, we are financially robust and have strengthened our resilience."
That resilience is going to come in handy against Tesla. Earlier this year the carmaker delivered the first-ever Model Y sedan made in its Berlin factory.
Meanwhile, Volkswagen said last month that it had started production of the ID.4 all-electric crossover at a new facility in Emden, Germany.
And the company is planning to introduce an electrified version of the Scout with production slated to begin 2026.
Diess said at the time that "electrification provides a historic opportunity to now enter the highly attractive pick-up and R-SUV segment as a group, underscoring our ambition to become a relevant player in the U.S. market."
HSBC analyst Edoardo Spina was feeling good about Volkswagen as he recently upgraded the company's shares to buy from hold.
"VW’s ID ramp-up issues and general weakness in China from last year started improving and we expect further strength as the market recovers from the ongoing lockdowns during 2H22e," Spina told investors in a research note. "In Europe, VW is guiding for strong momentum in the EV market, and the headwinds from the disruptions in Eastern Europe and the semiconductor shortages are impacting earnings."
Volkswagen is planning an initial public offer for the sports car brand Porsche and Spina said this is to be a "crucial positive catalyst" in the fourth quarter.
Brian V. Larson, marketing professor Widener University, said that while Tesla is far ahead of VW and every other manufacturer in EV production and sales, VW is positioned to claim the number one spot in the near future.
"While an enormous global company, VW has shown itself to be a nimble and responsive competitor in the EV market," Larson said. "With its many brands like Audi, Porsche, Skoda and others, it brings a wealth of muscle to any arena it competes in. The EV arena is going to see a shake up and Tesla might find itself playing catch up lives up to its potential."
There have been stumbling blocks in Diess' journey toward EV dominance. In 2019, he had to apologize for using a phrase that echoed the Nazi-era slogan "work sets you free."
That same year, Diess and Volkswagen's chairman, Hans Dieter Pötsch, were charged by German prosecutors with stock market manipulation tied to the carmaker’s diesel emissions scandal.
'Dieselgate' and Beyond
The charges stemmed from the company's admission in 2015 that it had rigged millions of diesel cars worldwide to cheat on emissions tests.
Volkswagen said at the time that the allegations were unfounded. The charges were dropped in 2020 in exchange for a fine of 9 million euros, or about $10 million.
Last month, the company agreed to pay 193 million pounds, or $242 million, as part of an out-of-court settlement to around 91,000 British drivers connected to the "Dieselgate" scandal.
And Volkswagen has been criticized for operating a factory in the Chinese province of Xinjiang, where the government has been accused of carrying out human rights abuse.
Diess said the company would not end its operations there because "we believe that our presence has a positive impact."
In addition, German media is reporting that company is facing an investigation by Brazil's public prosecutors over accusations of human rights violations at a large farm it ran in the Amazon rainforest basin in the 1970s and '80s under the country's then military regime.
Volkswagen Brasil, which in 2017 already acknowledged cooperating closely with the dictatorship and providing it with “black lists” of politically suspect employees, said in a statement that it will “contribute to the investigations in a very serious manner," according to La Prensa Latina.
