- "We have to accept that Tesla sets the new benchmarks [on] … the EV side," Herbert Diess says.
- Back in March, Diess dismissed the notion his firm could join forces with Tesla, telling CNBC the German automotive giant was looking to go its own way.
Earlier this month, Musk addressed VW executives via video link after being invited to do so by Herbert Diess, who heads up the German automaker. Musk's appearance was confirmed by Diess on Twitter and in a post on LinkedIn.
"I very much appreciate it that he showed up — I think we had a nice dialogue," Diess, who was speaking to CNBC's Julianna Tatelbaum on Thursday, said.
"And we have to accept that Tesla sets the new benchmarks [on] … the EV side," Diess added. "Not only technology wise, but also when it comes to productivity, speed … I think it's always good to have competition."
The Volkswagen Group, which is pursuing an electrification strategy, is headquartered in the German city of Wolfsburg. Elon Musk's Tesla is building its Gigafactory Berlin-Brandenburg in Grünheide, a few hours' drive from VW's base.
"I very much appreciate that he's coming to Germany," Diess said. "He will challenge us, but we will try to follow as fast as possible."
Diess' comments were made after his firm posted earnings for the third quarter. Operating profit before special items dropped by 12.1% to 2.8 billion euros ($3.25 billion), with the German automaker citing "supply issues."
In a statement, the company said: "The global semiconductor bottlenecks particularly impacted on the business performance of the Volkswagen Group in the third quarter."
The shortage of semiconductors is not unique to Volkswagen. On Thursday, the Society of Motor Manufacturers and Traders said U.K. car production in September declined by 41.5% year-on-year.
"Output continues to be hampered by the production stoppages caused by the ongoing global shortage of semiconductors as well as the loss of production capacity arising from the closure of one of the UK's larger plants," the SMMT said.
A total of 67,169 cars were manufactured last month, the industry body said. This represented "the worst performing September since 1982."
While overall output was down, the production of battery electric, plug-in hybrid and hybrid models accounted for 32.3% of cars made.
Back in July, the Volkswagen Group said half of its sales were expected to be battery-electric vehicles by 2030. By the year 2040, the company said almost 100% of its new vehicles in major markets should be zero-emission.
A few months earlier, in March, Diess dismissed the notion his firm could join forces with Tesla, telling CNBC that the German automotive giant was looking to go its own way.
Speaking to "Squawk Box Europe" at the time, he was asked if he would rule out any future deal with Elon Musk's electric car maker, in which VW could manufacture its cars, or if the Tesla and VW brands would ever unite.
"No, we haven't considered [that], we are going our own way," he replied. "We want to get close and then overtake."
"We think that we can – we need our own software stack, our own technology," he added. "And also, I think Tesla, or Elon, is very much thinking ... [about] his way forward. So no, there are no talks between Elon Musk and myself regarding joining forces."
Volkswagen is one of several major automotive companies turning its attention to electric mobility. In July another German firm, Daimler, said its Mercedes-Benz brand would "be ready to go all electric at the end of the decade, where market conditions allow."
—CNBC's Chloe Taylor contributed to this report