Volkswagen Group CEO Herbert Diess has admitted that Tesla is a stronger rival than expected, making it harder for the German automaker to reach its goal of becoming the world's largest seller of EVs by 2025. Despite that, Diess said at the FT Future of the Car 2022 conference that VW maintains that target.

"It will be a tight race but we won't give up on it. I have to say we didn't expect our main U.S. competitor to be so fast and well-prepared."

The executive added that Volkswagen Group's bigger product offering covering luxury and premium cars as well as volume brands could represent a key advantage over Tesla in the German automaker's quest to become the world's top electric vehicle maker by 2025.

On 22 March, Tesla officially opened its first European gigafactory near Berlin, challenging Volkswagen, BMW and Mercedes-Benz on their home ground. At the time, Diess said he expected Tesla's ramp-up to be challenging, but that is something normal for a brand-new plant.

VW ID. Buzz and Volkswagen Group CEO Herbert Diess

During Tesla's Q1 2022 earnings call, Elon Musk said that with new factories the initial ramp always looks small, but it grows exponentially. He added that the company expects both Giga Berlin and Giga Texas to achieve high volume by the end of this year, noting that it usually takes 9 to 12 months for a new factory to reach volume production from the start of manufacturing. 

Herbert Diess has been criticised last year—especially from within the company he's heading—for regularly benchmarking Volkswagen against Tesla and saying that the US EV maker's agility and speed are putting pressure on the VW's established structures. 

Diess has been adamant that Volkswagen must transition quickly and efficiently to electric vehicles, warning that it could fall behind if it failed to do so. That statement and his friendly attitude toward Elon Musk has triggered stark criticism from VW works council head Daniela Cavallo. 

Most recently, Diess said that without the $2.2 billion EV plant in Wolfsburg that's scheduled to open in 2026, VW would have no chance to compete with Tesla.