German car manufacturer Volkswagen rose by as much as 8.8% on Wednesday, extending the gains made the day before when it unveiled its plans for expansion in the electric vehicle market that could make it the world’s leading producer.
Shares were up as much as 8.8% at one point, at 291 euros ($346), their highest since November 2008 and set for a 25% gain so far this week. Volkswagen’s US-listed shares closed 10% higher on Tuesday.
At its “Power Day” on Monday, Volkswagen said it would build six electric vehicle battery factories across Europe and produce predominantly electric cars by 2030. This has triggered a surge in the value of its shares.
Volkswagen also stated it could significantly reduce battery production costs, which in turn would drive down electric vehicle retail prices, and invest into building an electric vehicle software infrastructure to be used across all of its brands.
Disruption in supply chains through factory closures, manufacturing interruptions and delivery delays have put pressure on the car manufacturing industry throughout the pandemic.
By shifting its focus towards electric vehicles over the past year and effectively emulating Tesla’s strategy, Europe’s largest carmaker has gained back a significant amount of ground. Volkswagen shares have risen by 180% since the market crash in March last year.
The company is aiming to dethrone Tesla as the global leading manufacturer of electric vehicles: “Our goal is to secure a pole position,” said Herbert Diess, CEO of Volkswagen, on “Power Day”.
These chips have become a crucial part of the supply chain.
Car companies like Ford use them to power the modern-day technology in their vehicles – the engine, Bluetooth capabilities, seat systems, collision and blind-spot detection, transmissions, WiFi, and video displays systems all run on the chips.
And the silicon components are what power the high-tech gadgets from companies like Apple that we use every day. The upgraded technology in gaming consoles and 5G smartphones in particular require a lot more power, and therefore rely more on chips than previous generations.
Automakers like General Motors, Toyota, Ford, and Subaru, to name a few, were forced to close factories around the onset of the pandemic. When the factories reopened, customer demand for cars had skyrocketed as people, stimulus checks in hand, jumped at the opportunity for low-interest rates and a way to get around that didn’t involve mass transportation.
The shortage doesn’t look like it will let up any time soon
Computer chip makers are running at maximum capacity and it’s not feasible for companies to build factories to compensate for the increase in demand, Bloomberg has reported.
Phone makers like Apple are more prepared to pay higher prices for the chips than automakers are, according to an analyst who spoke to Bloomberg. That doesn’t mean phone makers haven’t been negatively impacted by the chip shortage though – Apple reportedly faced supply issues for chips to power its 5G-equipped iPhone 12 models that debuted in October.