Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Long IdeasStocks

Volkswagen’s Woes Not Necessarily Good News for Tesla

There’s a popular theory floating around the stock blogosphere right now that Volkswagen’s (OTC: VLKA) diesel gate woes will be a big boost for Tesla Motors (NASDAQ: TSLA).

Our new customers report average savings of $522 on car insurance! Click Here!

The thinking behind the thesis goes something like this: By demonstrating that the only way diesel cars can pass emissions tests is to cheat, Volkswagen has shown that electric cars are the future. Even if that is true, and it might be, Volkswagen and not Tesla could be the big winner.

Volkswagen’s Electric Car Capabilities

The reason for this conclusion is rather obvious: Volkswagen has electric car capabilities that are just as good or better than those at Tesla. Two VW subsidiaries, Audi and Porsche, have unveiled electric concept cars with capabilities that exceed those of the Tesla S series. The electric variation of Audi’s Quattro SUV can run for 310 miles on a charge of electricity (slightly farther than the S), and it can accelerate from 0 to 60 miles per hour in 4.5 seconds, Forbes reported.

Crowds at the Frankfurt Auto Show admire the latest Audi electric SUV.
Crowds at the Frankfurt Auto Show admire the latest Audi electric SUV.

Porsche’s Mission E also has a range of 310 miles on a charge, and its can batteries can be charged to capacity in just 15 minutes. The Mission E is a stylish sedan that looks even better than the Tesla Series.

It looks as if Volkswagen has already cracked the electric car code. It knows how to make electric vehicles that are just as good or perhaps better than Tesla. That should worry Elon Musk to death because Volkswagen has resources his little boutique car company cannot begin to match.

Why Volkswagen Could Crush Tesla

The best way to demonstrate why Volkswagen will pulverize Tesla in the electric car wars is to take a look at the two companies’ resources. When one takes a look at the resources, it does not even look like a battle; VW has already won.

Here’s the weaponry Volkswagen will be going to war with:

  • Revenues of $254.7 billion on June 30, 2015
  • $18.31 billion in cash from operations
  • A free cash flow of $468.88 million
  • $36.38 billion in cash and short-term investments
  • A net income of $13.01 billion
  • A market capitalization of $65.25 billion
  • An enterprise value of $154.33 billion

Okay, that’s just the money, which is probably the most important resource here. The amount of money that Volkswagen has in the bank, $36.38 billion, exceeds Tesla’s market cap and enterprise value. For the record, Tesla had a market capitalization of $28.86 billion and an enterprise value of $30.68 billion on October 16, 2015.

The financial resources available to Tesla on the same day were not very impressive either. They included:

  • A TTM revenue of $3.703 billion.
  • A net income of -$520.4 billion.
  • A free cash flow of -$564.68 billion.

Judging by those three numbers, it looks as if Tesla is losing money every time it opens the doors. One has to wonder how it can stay in business let alone compete. Volkswagen has enough money in the bank to win the electric car wars.

Volkswagen vs. Tesla

The financial resources that Volkswagen can bring to bear are tremendous, but its physical resources are even greater. Some of those resources include:


  • 119 production plants around the world. Tesla has one factory in California and a small assembly plant in the Netherlands. It is also constructing the Gigafactory, a massive factory, outside Sparks, Nevada.


  • Volkswagen claims it can produce 41,000 vehicles every day. Tesla will not say how many cars it makes, although it plans to sell around 55,000 Model S sedans this year. In other words, Volkswagen makes more cars every two days than Tesla does all year. Tesla claims its operation can build 100,000 vehicles a year. Volkswagen builds around 287,000, or nearly three times Tesla’s whole production, a week.
Tesla Assembly in Freemont California.
Tesla Assembly in Freemont California.
  • Volkswagen currently has around 650 dealers in the United States with plans to add 100 more by 2018, according to Automotive News. Tesla famously has no dealers whatsoever.


Judging by the financial and physical resources, there is simply no way that Tesla could compete with Volkswagen in the electric car business. If Volkswagen starts aggressively marketing electric vehicles, Tesla is toast. It simply cannot compete; the only hope Elon Musk’s company could have for survival is to sell Volkswagen lithium-ion batteries from the Gigafactory.

One just has to wonder how the Tesla zombies can keep up their boosterism. The numbers and the facts prove that their pet rock cannot compete with Volkswagen. At the end of the day, Tesla is still a modest boutique car company in a world of automotive giants. It’ll be a miracle if it survives, let alone makes a profit.