If Volkswagen develops electric vehicles, will it become a competitor to Tesla?

There were previous reports that Volkswagen would acquire Tesla, but judging from Volkswagen’s recent actions, Volkswagen might become Tesla’s competitor.

A few weeks ago, anonymous sources told German media that Volkswagen CEO Herbert Diess was interested in buying a stake in Tesla. Then, this week at the Frankfurt Motor Show, Volkswagen unveiled two electric vehicles that look a lot like Volkswagen's answer to Tesla's battle for the flagship market.

The two new models - the Porsche Taycan and the Volkswagen ID.3 - have similar specifications and price ranges to Tesla's Model S and Model 3, respectively. Volkswagen's CEO made it clear that the relationship with Tesla is more likely to be competition than cooperation.

"I would not consider a Tesla stake," Diess said on Wednesday, dispelling rumors. "I would not buy shares because I think everything they (Tesla) do, we can do."

But personally, he doesn't mind being known as Tesla's boss. Diess said he admires Tesla as a company and enjoys driving Tesla cars. But he doesn't see Musk's electric car startup as a threat to his company because the two companies are so different in size.

"In the long term, I think there may be some advantages due to scale," Diess explained. "In terms of hardware, there may not be much difference because they also have a dedicated electric platform and they are already very well suited to electric car manufacturers."

Diess also acknowledged that Tesla is a leader in the development of software technology related to electric vehicles, which is said to be the main motivation for Volkswagen to acquire Tesla.

“When it comes to the next important thing, which is software, Tesla is strong in software,” Diess said. “But software is really a volume game. If you do software, you have to do it with 10 million devices, not 1 million.”

Both Volkswagen and Tesla are investing heavily in electric vehicles. The difference is that Volkswagen has a dozen other profitable gasoline car brands (Audi, Porsche, Lamborghini, etc.), while Tesla has only one product line that is not yet profitable.

“I don’t believe Tesla will go bankrupt,” Diess said of Tesla’s often tight cash position. “I like Elon Musk very much and I wish him all the best. Tesla is close to profitability now. Probably the biggest challenge is the extension of the category because the investment is so big.”