Electric cars sales haven’t been great in the U.S., Europe, and parts of Asia.
Dealers in California are struggling to meet the state’s sales quotas for alternative fuel vehicles, and it is a gem to find a fully electric car on the road in the rest of the United States.
But car makers refuse to give up on the electric car because of its potential for growth in the future.
The rousing success of the Model S by Tesla (NASDAQ: TSLA) is a sign that there is opportunity in going electric.
And Volkswagen AG (OTC: VLKAY) is betting big by planning to offer up to 40 different plug-ins and hybrids.
You read that right.
VW will start small by introducing 14 alternative models by 2014 to test the market waters, but this will eventually grow to 40. This is a far leap from two years ago, when VW scoffed at the very notion of EVs on the market, according to Bloomberg.
You may be wondering why VW is investing so heavily in EVs when sales have been minute all over the world. It is fair to point out that electric cars are still new to the market, and it will take some time before more people get accustomed to them. This is what car makers like VW are betting on.
But I have a hunch that VW is secretly gearing up for competition with Tesla as well. Tesla has recently entered the European market amid high demand. 14 alternative models would certainly outnumber Tesla’s line of cars, but the only question is whether VW can match the quality, battery power, and customer guarantee that Tesla offers.
Where Tesla went right was its small-scale focus on producing a limited number of solid electric cars like the Model S – a car that has gained positive traction with critics and consumers alike.
By planning 14 alternative models – and 40 different versions over the time – I fear VW may be biting off more than it can chew. I’m not saying it can’t be done, but can you really produce quality and spread your creative focus among 40 different types of vehicles?
Or would you rather be like Tesla – not having as many vehicles on the market, but taking the time to produce that one car that enamors the populace?
I think the answer is fairly obvious.
To kick things off, VW debuted two new electric cars at an auto show in Frankfurt: the e-UP! and the e-Golf.
I’ll be perfectly blunt. These cars essentially resemble previous electric cars, and I don’t know why automakers keep designing EVs that bring nothing new to the table – especially since Tesla keeps whipping major automakers in the EV/hybrid sales arena.
VW’s latest electric cars are compact and efficient in their own right, and they will do well among young people and those living in urban centers.
But these cars do nothing in regards to reaching out to new customers.
Many car consumers are turned off by the look of EVs, and people with this line of thinking will certainly not be swayed by VW’s latest models.
There are two things car makers must do if they want to compete with Tesla. First and foremost, they must tackle the issue of limited driving distance. Tesla has been able to blow the competition out of the water because its Model S has the highest mileage of any electric auto out there.
A primary complaint among consumers is the limited driving range of electric vehicles, coupled with the limited number of recharge stations around the country, which is a primary fear among consumers in China.
And there is also the appearance factor.
Very few car makers have come close to matching the style that the Model S has to offer, so in this regard, Tesla is still the top dog in the alternative vehicle market.
I look forward to seeing the future versions VW comes up with, but if they lack creative focus, then all of this effort to boost electric cars will be wasted energy.
And if you think VW’s expansion of its EV department will bode well in Europe, think again.
EVs in Europe
Germany registered 214,044 new cars in August, and only 435 of them were electric autos.
Despite Europe’s progressive stance on a variety of issues, electric cars only make up .23 percent of sales in Europe.
To compensate for lack of sales, many automakers in Europe are investing in rental fleets.
The fact is, Europeans have the same concerns as Americans and Asians as far as limited driving range, the lack of recharge stations, and high prices.
Despite government credits, electric cars are still an expensive purchase in Europe, and with rampant unemployment and an economic recession, many Europeans cannot afford the luxury.
The good news for VW is that car sales for private and light commercial vehicles increased 4.5% in the first eight months of the year.
But VW felt a slight pinch as well, with global sales falling to 466,100 units in July, a .05% dip, thanks to economic troubles in Europe.
But it remains to be seen if the company’s future electric car division will add to sales figures.
Tesla or Volkswagen?
I would keep an eye on Volkswagen, but in terms of safe investment bets, I would go with Tesla. Volkswagen has an ambitious goal of expanding the EV market, and the move can add value to the alternative vehicle sector.
But I keeping coming back to Tesla because CEO Elon Musk has truly set the bar high among electric autos. The Model S defies negative perceptions of the electric car. It is a car that looks just like any other gasoline-based engine, which is what many consumers want in the first place. And the 300 mile charge is enough to satisfy buyer concerns about distance and battery life.
If Volkswagen can address those issues like Tesla did, the German automaker would be in the green as far as competing with Tesla. But I’m not saying VW should copy Tesla either. Producing an EV that can compete with conventional cars in the looks department, and having a solid driving range to back it up, would definitely encroach on Tesla’s territory.
The EV market is heating up, but so far I have not found one alternative vehicle that can take sales away from the Model S.
But EV technology is improving, and other automakers will soon be able to replicate the power of the Model S.
Will VW be that company that can compete directly with Tesla?
We’ll see if words translate into action.
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