Volkswagen’s 2021 electric ID.4 Pro S.
Courtesy of Volkswagen
Voltswagen. That’s the name the German auto maker Volkswagen is taking in the U.S. The change is little—a “k” for a “t.” But it shows just how big the company’s electric vehicle ambitions are.
Volkswagen (ticker: VOW. Germany) accidentally disclosed its renaming plans Monday, CNBC and USA Today reported. The company didn’t immediately respond to a request for comment, but people familiar with the matter confirmed the change to both outlets.
Images of the news release were posted on Twitter (TWTR). The announcement carries two dates, March 29 and April 29, which might explain the mix-up.
Investors reacted positively to the letter swap. Volkswagen American depository receipts, or ADRs, rise 5.2% Monday. What’s more, the stock has gained more than 64% year to date. Shares shot up earlier this month after the company laid out more ambitious EV goals.
The name change isn’t the only thing affecting shares. The stock is getting a lift after an upgrade by Jefferies analyst Philippe Houchois. On Sunday, he raised his rating to Buy from Hold and increased his price target for preferred stock to about $350 a share from $235.
“Volkswagen went on an impressive Public Relations overdrive in recent weeks,” he wrote. “Bringing together strategic decisions …with more aggressive EV penetration targets and a comprehensive vision of cars of the future.”
Volkswagen has always had some of the most aggressive EV goals of any traditional auto maker. Today, the company is targeting about 50% of total sales by 2030 to come from all-electric vehicles—up from its prior goal about 25% set a while back.
The goal is a big for the industry since Volkswagen is the world’s largest car maker, measured by unit volume. To reach its goal, Volkswagen would have to sell 5 million to 6 million all-electric vehicles in 2030—about 10 times the number sold by EV pioneer Tesla (TSLA) in 2020.
Selling that many EVs has the chance of triggering a cascading effect for other traditional auto makers. The upshot: faster-than-expected EV penetration of the existing auto market.
Like Volkswagen, General Motors (GM) and Ford Motor (F) have outlined new EV goals, too. Both stocks are up more than 30% year to date.
Tesla stock, though, is down more than 13% year to date, pummeled by higher interest rates and weaker-than-expected first-quarter deliveries. Shares are off roughly 30% since the 10 year Treasury bond yield started to rise. Here’s why: Higher rates make future cash flow generated by high-growth companies like Tesla worth a little less, relatively speaking, when investors can earn more interest income right now.
Also hurting EV stocks is the global automotive microchip shortage. NIO (NIO) shares fell more than 4% Friday after the company cut its first-quarter delivery guidance. The news was a drag on all EV stocks.
Ford and GM have acknowledged the chip shortage, calling it a billion-dollar headwind to 2021 profits. Still, their stocks are up year to date. There are a couple of reasons why: GM and Ford aren’t valued like high-growth stocks and, for the most part, their investors and Tesla investors are different people.
Now maybe it’s easier to understand how changing one little letter can create such a big to-do.
Write to Al Root at [email protected]
