AutoMobility Insights - May 2025 edition

The last weeks have highlighted growing challenges but also new opportunistic plays across the mobility ecosystem. Tesla's struggles are becoming increasingly obvious, as only regulatory credits allow it to avoid operating losses. Volkswagen’s €600 million provision for missed fleet CO₂ targets shows how difficult it is to reach EV targets even in the modified fleet emissions framework. Bill Ackman’s bold entry into Hertz signals that asset-heavy mobility models can still attract capital - if the timing and upside align. At the same time, fresh utilization data suggests that in some countries charging infrastructure is running ahead of actual demand: over 25% of public chargers remain unused, just as BEV sales stall in the wake of reduced subsidies. These contrasting signals - operating losses, penalties, portfolio bets, and infrastructure readiness - underline the need for a sharper, data-led view of value and viability across the ecosystem. It’s a reminder that the next phase of transformation may be less about momentum - and more about recalibration and perpetual adjustment.

Volkswagen has set aside €600 million in Q1/25 to cover expected penalties for missing fleet CO₂ emission targets - an unmistakable sign that the pressure to balance compliance, profitability, and powertrain transformation is intensifying. The shortfall comes despite ongoing efforts across the Group to ramp up BEV sales and scale platform efficiency. A combination of factors has led to the need for the provision: a slower-than-expected ramp-up of volume BEVs like the ID.3 and ID.4, persisting demand for ICE and PHEV models in higher-margin segments, and supply constraints in battery and software modules. The €600 million set-aside follows a difficult 2024 in which multiple European OEMs faced similar headwinds - lack of affordable BEV models in the compact segment, consumer pushback on price parity, and an uncertain macro environment. While the sum is not financially critical for VW, it does raise eyebrows, given the Group’s stated ambitions to lead the volume-BEV space in Europe. In the coming quarters it will now be  interesting to see if Stellantis, Renault or even Mercedes-Benz will put similar provisions in place.

CVA perspective:

Volkswagen’s provision underlines the high stakes balancing act between Volume, Powertrain, and Price. Despite the EU’s new 3-year averaging rule, VW’s early provisioning suggests that its current powertrain mix, and BEV volumes are not aligned with compliance expectations - at least not at acceptable margin levels. The risk: delaying BEV ramp-up to preserve profitability today may lead to much deeper price cuts and margin compression in 2027, when OEMs rush to meet targets in the final year of the compliance window. And with demand volatility, regulatory shifts, and competitive pressure from players like Tesla and BYD, this final-year push could prove even costlier than absorbing provisions now. Therefore, OEMs need to quickly challenge their forecast models by not only incorporating sales and emissions, but also margin impact, policy shocks, and competitor behavior - the time to make those Excel tabs dynamic is now, not in 2027!

Tesla has published its Q1/2025 results in  April, reporting a 21.5% decline in automotive revenues and a 13% decline in deliveries & sales. Due to the fairly stable model mix, the discrepancy must come from average price decreases YoY of ~8%p. Despite a strong performance of Tesla's other business lines (energy storage, services) the gross margin and net margin declined to a level on which Tesla would have had to report an operating loss, if it hadn't received USD 595m of regulatory automotive credits in the quarter. 

For the continued revenue and sales decline Tesla has blamed primarily the refresh of a new model Y version, however a deeper analysis shows that the premium segement vehicles (Model S & Cybertruck) have shown an even stronger decrease with -24%. Q1/24 was a particularly low comparison quarter (impacted e.g. by the sudden stop of subsidies in Germany), comparing the sales decline to Q4/24 shows a total drop of 33% across all vehicle models.

CVA perspective:

With its vehicle activity under massive pressure (volumes, brand, product line-up...), Tesla is increasingly becoming a bet on robotaxi dominance, a bet which we consider riskier than many others in the anyway volatile automotive sector. All the more that, compared to Google's Waymo, Chinese BYD & Baidu etc., Tesla seems to have fallen behind on autonomous driving. Not completely unlike its historic competitors, Tesla will need to "get its EV act together" (product line, price level, cost...) in order to keep market share not only vs Chinese, but also vs incumbent OEMs. Spurred by CO2 regulations and completing product lines, these latter ones are starting to develop significant market share, in some markets even distancing Tesla (cf VWAG in the European market). 

Bill Ackman has taken a 20% stake in Hertz through his hedge fund Pershing Square, becoming one of the company’s largest shareholders. The move, disclosed in early April, instantly doubled the price of Hertz shares. According to statements from Pershing the investment is built around two pillars: a potential recovery in used car prices, and belief in a long-term turnaround of Hertz’s core business. Hertz, which exited bankruptcy in 2021, has faced turbulence in recent quarters. Its accelerated EV rollout - once touted as a bold strategic pivot - led to operational friction and resale losses, culminating in the offloading of 20,000 EVs earlier this year. With over 500,000 vehicles on its balance sheet, however, the company is heavily exposed to fluctuations in used vehicle prices, a key lever in Ackman’s bet.

CVA perspective:

Ackman’s move into Hertz isn’t just a vote of confidence in management—it's a tactical wager on asset appreciation and cyclical timing. With used car prices likely to increase in the aftermath of tariffs and hence new car price hikes, the company’s balance sheet could unlock upside through embedded vehicle value. But in order to fully externalize this value, Hertz must streamline operations, also with the help of pervasive IT / Digital capabilities, and execute on a leaner fleet strategy. Rising interest rates add pressure. Still, the investment underscores a broader truth—legacy mobility firms can draw top-tier capital when asset optionality aligns with a credible turnaround path.

A new analysis by Elvah, published in Automobilwoche, reveals that a substantial share of Germany’s public charging points sees almost no usage. From July to December 2024, over 25% of DC and 22% of AC chargers had zero recorded utilization, with many remaining idle for weeks at a time. This comes as Germany’s public charging network grew by more than 20% in 2024, reaching over 160,000 charging points - despite falling BEV registrations, largely driven by the end of government subsidies. While expansion of the network was meant to enable a growing EV base, it now appears that charging infrastructure has outpaced actual demand, especially outside of urban or highway hotspots.

CVA perspective:

Germany’s charging market is drifting into structural oversupply—a paradoxical outcome in a sector often cited as a bottleneck to BEV adoption. The assumption that “more chargers = faster transition” is now being challenged by real-world usage data. For investors, operators, and policymakers, the message is clear: infrastructure rollout must shift from expansion to optimization. Usage-based deployment, dynamic pricing, and smart clustering are essential to improve economics and reduce stranded assets. The current mismatch between charger supply and BEV uptake is unlikely to self-correct through scale alone. As the market consolidates and capital tightens, only infrastructure tied to real, recurring demand will be defensible - both on the street and on the balance sheet.