Volkswagen's (VWAGY) $22M Battery Lab to Bolster EV Initiatives

Volkswagen AG’s VWAGY American operational headquarters, Volkswagen of America (“VWoA”), recently opened its Battery Engineering Lab (BEL) in Chattanooga, TN, to carry out testing of batteries for electric vehicles (EVs) in the American marketplace.

The company has invested $22 million in the sprawling facility, which will enable it to have an edge in the electric mobility space. It already has an existing electrification factory in Chattanooga, with an investment of $800 million. Volkswagen has pledged $7.1 billion investment to boost its product portfolio, R&D and manufacturing capabilities in the North American region. The first American-assembled Volkswagen EV, the ID.4 compact SUV, is slated to roll off the assembly line in 2022.

The BEL is VWoA’s first-of-its-kind facility and one of the four strategically located units in the Volkswagen Group globally, with one in Germany (Braunschweig) and two in China (Shanghai, Changchun). It will empower the company to respond to the surging EV boom and hone its local engineering skills. The BEL will also see a number of highly-qualified jobs being added.

The BEL will also bring a new team of engineers, who will focus on various climatic, mechanical, electrical and corrosion tests of battery cells and battery packs. They can replicate every climatic environment in the world and accordingly integrate them into vehicles. This feature is especially important in countries like the United States – and even more so for the North American continent – with its extreme climate variations, from arctic cold to desert heat.

The BEL’s focus on sustainability is a highly specialized feature. When batteries are discharged during testing, the energy produced will be transferred back into the building, which will recycle the local public grid and scrapped materials. The BEL initiative promises to be a springboard for the company in its EV efforts.

Volkswagen has plans to bolster its footing in EV batteries and create a robust market for electric vehicles for American consumers. In the long run, it aims to conduct research and generate insights on how prototypes can withstand the company’s rigid specifications.

Shares of WAGY have lost 37.7% over the past year compared with its industry’s 27.3% decline.

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Zacks Rank and Key Picks

VWAGY currently carries a Zacks Rank #3 (Hold).

Better-ranked players in the auto space include Wabash National Corporation WNC, carrying a Zacks Rank #1 (Strong Buy) and Fox Factory Holdings FOXF and Standard Motor Products SMP, each carrying a Zacks Rank #2 (Buy) currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wabash National has an expected earnings growth rate of 239.3% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

Wabash National’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. WNC pulled off a trailing four-quarter earnings surprise of 51.26%, on average. The stock has declined 0.4% over the past year.

Fox Factory has an expected earnings growth rate of 14.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 1% upward in the past 30 days.

Fox Factory’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. FOXF pulled off a trailing four-quarter earnings surprise of 10.18%, on average. The stock has declined 39.3% over the past year.

Standard Motor has an expected earnings growth rate of 2% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

Standard Motor’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. SMP pulled off a trailing four-quarter earnings surprise of 40.34%, on average. The stock has declined 11.6% over the past year.

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