What's going on?

Volkswagen proved an age-old adage this week, reporting strong results even though supply shortages hit its production last year.

What does this mean?

Supply issues meant Volkswagen was lacking a few key production parts last year, so it only ended up selling 8.6 million cars in 2021 – 6% lower than the lockdown-stricken year before. But the carmaker brought in a new strategy faster than you can say, “drive bigger”: it focused on selling more expensive high-end models to make up for lost sales on its more affordable cars. And boy, did that pay off: Volkswagen made 12% more in revenue last year than the one before, and even almost doubled its pre-tax profit – partly because it managed to cut overhead costs by 10% a year earlier than planned.

Why should I care?

Zooming in: Volkswagen has big plans.
Volkswagen might’ve sold fewer cars overall, but sales of its electric vehicles (EVs) – its biggest focus – nearly doubled last year. That helped the carmaker finish the year with a quarter of the European battery EV market in its clutches, making it a market leader in the region. And it looks like Volkswagen’s shooting for even more of the market: it’s expecting to use the cash it raises from its planned listing of Porsche later this year to help it build six European battery plants and speed up its electrification.

The bigger picture: China’s in control.
Volkswagen’s just one of the many western carmakers planning to build battery plants these days, but it doesn’t seem like China’s ready to release its dominance over the sector anytime soon. Quite the opposite: the country’s battery makers – including CATL, CALB, and Svolt – are all planning big expansions over the coming years, which might be why China’s still predicted to make up about two-thirds of the sector’s manufacturing capacity by the end of 2030.