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Friday, October 23, 2020

Watch Out Tesla, Volkswagen Is Coming!

he competition for the electric vehicle market has moved up a notch. Just when it looked like German giant automaker Volkswagen had no answer to the onslaught from Tesla
TSLA
, it has released a much more affordable version of its ID.3 electric car. When the ID.3 was initially launched with the 1st Edition, the platform looked promising, but the price was too close to the Tesla Model 3. Now Volkswagen has announced a sub-£30,000 ($39,000) Life version of the ID.3, making it a much more tempting proposition.

This is less interesting news to readers in the USA, because VW isn’t currently planning to release the ID.3 in America just yet. But it’s huge news for Europe and has indirect consequences for the US. Although SUVs dominate sales in Europe too – 41% of the market according to the most recent JATO statistics – they’re even more popular across the Atlantic, with SUVs and SUV Crossovers accounting for 49.6% of the American market in April. So it’s no wonder that VW has focused on the ID.4 rather than the ID.3 for its US electric launch.

The First Edition launch version of the ID.4 sold out the day VW opened orders. This starts at a competitive $43,995, with a cheaper $39,995 ID.4 Pro version due to be delivered in early 2021. When the Tesla Model Y Long Range costs $49,990, the Volkswagen ID.4 looks like a bit of a bargain, particularly after Tesla cancelled the cheaper Standard Range version, which would have had a similar price to the ID.4 Pro. The Model Y does have a better basic specification, particularly after the recent Tesla efficiency updates across its range, which now give the Model Y Long Range an EPA endurance of 326 miles. The ID.4, in comparison, can only manage 250 miles of EPA range. It also takes a pedestrian 8.5 seconds to reach 60mph, compared to 4.8 seconds for the Tesla.

But the lower purchase price and general sense that “German interiors are better” do have some sway. Not everyone likes an interior with “woke” synthetic leather and a giant iPad in the central console for controlling absolutely everything. Some love that futurism, but others like discrete buttons for the air conditioning, dashboard instrumentation behind the steering wheel, and windscreen wipers you can control yourself with a traditional steering wheel stalk.

Like the ID.4 compared to the Model Y, the ID.3 doesn’t have the performance of the Model 3 Standard Range Plus it initially seemed to compete with on price, either. It takes 7.3 seconds to reach 60mph compared to 5.3 seconds, and has a 263-mile WLTP range rather than 267 miles. However, the ID.3 is not really in the same vehicle class as the Model 3. A lot of people in Europe prefer the hatchback car style. Going back to those JATO figures, Subcompact and Compact hatchback cars together make up 36% of the European market, while the Midsize sector within which the Tesla Model 3 sits is just 6.3%. So even while the Tesla Model 3 is clearly the biggest EV success story so far, the ID.3 Life is competing in a sector with higher volume, and now its price is closer to the internal combustion equivalent. The Life trim version of the VW Golf 8, for example, costs £23,300 ($30,000) in the UK, which is only £6,690 ($8,600) cheaper.

That’s not quite price parity yet but considering the perceived value of the Volkswagen brand for quality, it’s significant. Where there are cheaper EVs, such as the Renault ZOE, the ID.3, as the clear electric heir to the Golf, is in a different class and has clear potential to drive the electric vehicle market still further towards the mainstream driver. The ID.3 is less than £3,000 ($3,800) more expensive than the entry-level ZOE, for a better range, better performance, and a bigger, more flexible vehicle in general.

It’s easy to assume that Tesla’s technological lead and relentless development pace are insurmountable. The amount of interest, particularly in the Model 3, has been like no other electric vehicle manufacturer ever before. In fact, a recent report by Nationwide Vehicle Contracts, showed that the Tesla Model 3 was three times more popular in Google searches than any other EV. But Volkswagen’s dire situation with Dieselgate has perhaps been a blessing in disguise, forcing the company to take battery electric vehicles seriously sooner than other German behemoths BMW and Mercedes-Benz. Where the latter are still toying with electrifying existing ranges originally meant for internal combustion powertrains, VW is at least going pure battery electric, even if its platforms are behind Tesla’s, which has been doing this from the outset.

There will be another salvo from Tesla when it launches its much-discussed $25,000 vehicle, which will be momentous if it arrives at that price and in the form predicted. The signs are that this will be Tesla’s move from the luxury market to the same premium Compact/Subcompact genre as the Golf and ID.3. But there’s no sign that whatever this car is called – the “Model 2” is often mooted – it will arrive earlier than 2023/4. So that leaves the Volkswagen ID.3 with a good few years to establish itself as the Golf of EVs in this market segment. It’s highly likely that the Tesla Model 2 will then pose a strong challenge when it does arrive, and possibly dominate quite quickly as the Model 3 has. But at least the EV buyer now has some serious choices, and those choices are growing, with Volkswagen leading the charge.

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