almost 3 years ago • 3 mins
Sparks could be about to fly: Volkswagen – the world’s second-biggest carmaker – announced on Tuesday that it’s aiming to sell one million electric vehicles (EVs) this year.
What does this mean?
Volkswagen’s new target represents a big step up from the 231,000 EVs it delivered last year, and could see the German carmaker get one over on Tesla: its biggest EV rival produced 500,000 vehicles last year, and plans to increase that by 50% or more this year. And even if Volkswagen can’t catch up in 2021, it has the longer term in mind: the company’s aiming to become the world’s biggest EV manufacturer by 2025 at the latest. Investors, for their part, seem pretty optimistic about its chances: they sent the company's shares up 7%.
Why should I care?
Zooming in: It’s all down to the batteries.
Batteries are the most expensive part of an EV: get ‘em cheap and companies will slash the cost of their cars, making them a more appealing buy for customers and – fingers crossed – pushing up sales. That might be why Volkswagen also unveiled plans to build six battery factories in Europe by 2030 – a move that should cut its battery costs by as much as 50%.
For markets: These valuations are looking a bit skewiff.
Volkswagen’s odds of overtaking Tesla’s sales are looking pretty good, but its odds of overtaking its rival’s market value – $670 billion to Volkswagen’s $145 billion – are far slimmer. Some investors reckon this valuation gap can partly be explained by Tesla’s superior software – specifically its autonomous driving technology. Then again, it’s not like Volkswagen hasn’t got the edge in other ways: it already has the infrastructure to churn out millions of vehicles every year.
Keep reading for our next story...
Goldman Sachs upped its US growth forecasts over the weekend, but just as noticeable is what the investment bank left out of its updated prediction…
What does this mean?
The US just agreed to pump $1.9 trillion into its economy, so Goldman’s decision to bump up its growth forecast – from 6.9% to 7% this year, and from 4.5% to 5.1% in 2022 – hasn’t come as much of a surprise. And while those adjustments might not sound like much, Goldman’s previous estimates had already taken $1.5 trillion of economic support into account and were already well ahead of economists’ forecasts of 5.5% and 3.8% for this year and next. There might be more growth to come too: Goldman’s forecast didn’t even pencil in the boost from the potential $2 trillion infrastructure spending the US president touted in his election campaign.
Why should I care?
For markets: Invest in the pickaxes, not the gold.
If the $2 trillion infrastructure investment goes ahead, it’s expected to be spent on building greener homes, expanding the EV charging network, and fixing highways, bridges, and airports. But since it’ll need to gather enough political support to pass, that’s a pretty big “if”. Still, the prospect alone has pushed up the stocks of companies that stand to benefit – from equipment makers to engineering companies.
The bigger picture: Tax hikes could keep the US economy from overheating.
Spending trillions is easy, but finding trillions is another matter entirely. One potential solution, then, is to up taxes on businesses and the wealthy. And while skeptics might argue that the move would hurt economic growth, that might not be true: higher taxes could curb consumer and company spending, which would slow down price increases at a time when excessive government spending is at risk of pushing up prices too fast (i.e. inflation). That’s when the central bank would be forced to tweak interest rates, which could be bad news for your stocks...
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