Short-Sighted Analysts Highlight a VW-Tesla Race to Dominate Electric Vehicles

They are ignoring the most likely winner, suggests a top expert — China Inc.

For two weeks, Volkswagen has held auto industry analysts and reporters in unusual thrall: This 84-year-old German automaker, these opinion-makers have said, has managed a miraculous pivot from a legacy industrialist to a front-runner in the race to be the world’s number one producer of electric vehicles. Weighing in, Wall Street sent up VW shares by 20% in the last half of March, while cutting 13% from the stock price of Tesla, the current industry leader.

“The end of Tesla’s dominance may be closer than it appears,” reported Bloomberg. “Volkswagen will catch up with Tesla,” added The Economist in its latest edition.

About the same time all this adulation was going on, Sandy Munro, an iconoclastic former Ford executive who runs his own auto design consultancy north of Detroit, was holding forth in an interview with Alex Guberman, host of E for Electric, a YouTube channel. In a sometimes hilarious, sometimes brutal 23-minute dissection, Munro accused U.S. automakers of moving late into EVs and blundering into the very same market crisis they suffered in the 1980s, when they only belatedly understood that the Japanese could make autos.

This time, Munro says, the Chinese are poised to take a significant share of the global EV market. “Nobody pays attention to history,” he said. “They’re going to be in big, big trouble.”

Over the last year or so, Munro has become one of the most important influencers in EVs and batteries on YouTube. With about 155,000 followers on his channel, Munro Live, Munro takes apart Teslas while narrating his work in a slow, pointed, only-the-facts-ma’am patter. In February, he gained substantial credibility when he drove a Tesla Model 3 to Brownsville, Texas, the location of a SpaceX launch facility. Sitting for an interview for Munro Live, Tesla CEO Elon Musk said Munro had been right criticizing shoddy paint and side panels on a Model 3 he had taken apart on his channel.

To the degree Munro is correct about American automakers as a whole, the same can be said for the Europeans. VW, like General Motors, has adopted a hyperaggressive EV strategy. Both auto giants are spending tens of billions of dollars to design dozens of EVs to be deployed in large numbers beginning in the middle of the decade. They have similarly invested heavily in batteries — GM in creating what it calls the Ultium system, and VW with plans this decade to build six gigafactories across Europe. Both also vow to start equipping their vehicles with next-generation pure metallic lithium batteries in mid-decade.

Their EV buildout has the look of a frenzied scramble. Meanwhile, after a decade and a half of development, Tesla is on the way to already having four gigafactories around the world — the original in Nevada, with another in Shanghai, one in Berlin, and a fourth on the way in Austin, Texas. At his Battery Day in September, Musk spoke of a necessary mental shift to “terafactories” — while VW is boasting of producing 240 GWh of batteries a year by 2030, Musk said he would make three terawatt-hours, or 3,000 GWh.

China, paralleling Musk, has built up on another scale altogether. In a presentation in May last year, Simon Moores, CEO of Benchmark Minerals, a battery research firm, said there are 136 gigafactories either in operation or planned around the world, 101 in China and eight in the U.S. A new gigafactory is added every week in China, and one every four months in the U.S., Moores said. Today, 77% of the world’s battery cell-making capacity is in China, according to BloombergNEF, a clean energy research firm. “It’s hard for Western governments to get to grips with that fact that for EVs, lithium-ion batteries and their supply chains, the West are the developing nations, not China,” Moores tweeted last week.

Mark Newman, head of strategy at Nyobolt, a U.K.-based battery startup, said China is in the strongest commercial position at the moment because it controls the most important part of an EV — the battery. “China is in such a good position because of its dominance of the supply chain,” Newman told me yesterday. “It is its ability to ramp up tens of millions of electric vehicles. No one else can do that right now. It’s not just batteries but cathodes, anodes, and everything else feeding into this. The processing of the metals, owning the mining assets, contracts outside China. They have such a lock-in of mining assets, it’s scary.”

In the video interview, Munro said he expects Chinese automakers in the coming years to begin to sell EVs in the U.S., starting in California, and for Americans to buy them. He said he had driven a Chinese Nio and an Xpeng. “Everything was perfect,” he said. “The seats were good. Everything was as good as it could possibly be. Now what’s going to happen when that car shows up in the United States $10,000 cheaper than anybody else? Do you think the buying public is going to say, ‘I’m not buying Chinese. I’m going to buy American.’ You’re wrong. They don’t do it that way anymore. That stuff is all gone. To try to sell based on that it’s made here in the United States, everybody knows it’s a lie.” Munro held up an electronic board that he said came from a Tesla. “Almost every chip here is coming from China. Okay?” he said.

All these years, Munro said, GM, Ford, VW, and the rest of the Western car companies should have been going full throttle developing EVs and building gigafactories. “You can’t possibly win when you’ve got people at the top of the house thinking that somehow the Chinese are just going to give us some Chinese junk,” he said.

“So here’s the deal,” he said. “I think the Chinese are going to come in and they’re going to kick some serious ass. And it’s all going to be because the executives at the big car companies sat on their hands, thinking that the future is just a dim reflection of the past.”

Editor at Large, Medium, covering the turbulence all around us, electric vehicles, batteries, social trends. Writing The Mobilist. Ex-Axios, Quartz, WSJ, NYT.

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