Buying BEV platform in China could be 'big bang' for VW stock to win over large investors, says Deutsche Bank

Buying a BEV platform in China could be one of the "big bangs" needed for Volkswagen stock to break out of what can by now only be characterized as being largely ignored by many of the largest asset managers globally, Deutsche Bank said.

(Image credit: CnEVPost)

Volkswagen Group subsidiary Audi is rumored to be considering buying a battery electric vehicle (BEV) platform from another carmaker in China to shorten the development time for its models. In Deutsche Bank's view, the move would be welcome.

"We would highly welcome Volkswagen buying a BEV platform in China. To us, it would demonstrate a new mindset of Volkswagen with the willingness to really embrace partnerships," Deutsche Bank analyst Tim Rokossa's team said in a research note sent to investors today.

This is one of the "big bangs" needed for Volkswagen stock to break out of what can by now only be characterized as being largely ignored by many of the largest asset managers globally, and would be a real chance for a fresh start, the team said.

On July 9, German media outlet Automobilwoche reported that Audi was seeking outside help to shorten the development time of its models, and that the company was in talks with a rival in China.

In a report yesterday, Reuters said Audi was looking to take over an EV platform owned by IM Motors, the EV arm of SAIC.

IM Motors was founded on November 26, 2020, by SAIC, Zhangjiang Hi-Tech and Alibaba, with SAIC holding a majority stake.

Before the new architectures are ready in a few years, Volkswagen has pretty much given up on the idea of being able to really catch up with China's battery electric vehicle (BEV) segment in terms of scale, Rokossa's team said, adding that it's clear that a more radical solution is needed.

Buying the platform would be a very "unVWish" move -- quick and capital efficient -- but it would demonstrate Volkswagen's new thinking and willingness to really embrace partnerships and save money, the team said.

"We could envision others but our view is that SAIC would represent a potential partner: they're culturally familiar with each other, SAIC has decent tech developed with Alibaba and is lacking in scale," they wrote in the note.

A very unlike Volkswagen move could help to break them free and bridge the gap or even leapfrog them into a better future, the team said.

A potential, classic move for Volkswagen would be to spend billions of euros on research and development to catch up, but that would take too long. Instead, investing that money in a next-generation BEV platform would be a better option, Rokossa's team said.

Another classic Volkswagen move could be to buy a company and add more complexity and another brand, but that's not the best option, the team noted.

A technology partnership or just buying the platform could be a quick solution to the lack of competitive offerings without tremendous investment requirements, the team said.

Rokossa's team sees SAIC as a potential partner; the two companies have been working together for three decades and are very familiar with each other in terms of business and culture.

For SAIC, IM Motors is targeting a more premium segment, but year-to-date sales of its two models have been sluggish at around 10,000 units, suggesting a need to improve capacity utilization, according to the team.

The platform is generally a good fit for Audi because of its modularity, robust OTA/network and higher-level L3 ADAS capabilities, the team said.

In addition to SAIC, other automakers to consider, according to Rokossa's team, include BYD, Geely and Xpeng.

BYD could be seen as a strong fit due to its lack of a premium brand and flexible platform, but it also works closely with Toyota and has ambitions to move upstream, the team noted.

Geely was probably seen as too close of a competitor and has partnered with several premium brands -- Volvo, Zeekr, Jidu, the team said.

On Xpeng, while the software/ADAS technology is attractive, the company has shifted to the mass market rather than the premium and is focused on lowering the structural costs of its platform, similar to Tesla, the team said.

Overall, Rokossa's team said they would very much welcome Volkswagen buying a BEV platform in China, and there are plenty of examples of this in the industry.

Ford uses Volkswagen's MEB platform in Europe, and even Tesla initially used the Lotus chassis. It's more localized, more capital efficient, and most importantly, it's a quick solution that helps close the gap until a competitive platform arrives, the team said.

"We would see this as one of the big bangs needed for VW to break out of what can by now only be characterized as being largely ignored by many of the largest asset managers globally," the team wrote.

Audi reportedly in talks to buy platform from SAIC's EV unit IM Motors