Volkswagen electric plan to overtake Tesla runs into trouble

Key battery car project may be pushed back from 2026 towards end of decade as new software will not be ready in time

Volkswagen may scrap plans for a €2bn electric vehicle factory in Germany. 

Volkswagen’s ambitious push to supplant Tesla as the global electric vehicle leader is running into trouble.

Chief executive Oliver Blume plans to push back the key Trinity battery car project from 2026 towards the end of the decade because new software will not be ready in time, according to a person familiar with the matter. The company may also scrap plans for a €2bn electric factory in Germany. 

The delays complicate Volkswagen’s bid to catch up with Tesla and lay bare the challenges of overhauling Europe’s biggest carmaker, from retooling factories to fixing buggy software that has frustrated drivers of its electric cars.

Volkswagen “currently is taking the opportunity to look at all projects and investments and check them for viability”, the company said in an internal message to employees. A spokesperson declined to comment further.

Construction for the new plant near VW’s sprawling Wolfsburg facility was due to start next year, with first Trinity models rolling off the production line from 2026.

The decision to add a brand-new site was part of former CEO Herbert Diess’s bid to become more efficient and produce electric vehicles faster.

Mr Blume’s overhaul “could improve free cash flow at Volkswagen, but potentially delay electrification and crucial product launches”, Bernstein analysts led by Daniel Roeska said in a research note, adding that the carmaker should brief investors “sooner rather than later” on any strategy changes.

Aggressive strategies

Mr Diess, whom Blume replaced in September, last year unveiled aggressive strategies for electric vehicles, software, and new-mobility offerings. 

Mr Blume has to reverse some of those targets because they are unrealistic, the source said. 

Tesla sold more than twice as many fully-electric cars than Volkswagen in 2021, and its CEO Elon Musk has opened new factories this year in Texas and Berlin. 

Still, VW has been working hard to catch up. The manufacturer raised a tidy sum in September with the €9.4bn Porsche initial public offering, and has earmarked some €52bn through 2026 for projects including setting up six battery factories across Europe.

Volkswagen’s struggling Cariad software unit will be central to any changes. The business will focus on developing a new software architecture for premium models from Porsche and Audi, and push back a scalable cross-brand platform that was meant to bolster the Trinity project, according to unit CEO Dirk Hilgenberg.

While the premium software will get “top priority", Mr Cariad “will gain some time” to get the cross-brand platform ready, Mr Hilgenberg said in an internal letter to employees. Bloomberg