Volkswagen Will Hasten Its Transition to a Mobility Company

Ken Zino of on the latest Volkswagen business plan - Accelerate

An auto company that plans to compete with, well, all other transitioning automakers to mobility companies. Click to Enlarge.

Volkswagen says it has now earmarked around €16 billion for investment in the future trends of e-mobility, hybridization and digitalization in a strategy that goes up to 2025. To be able to finance the sizable future investments required, it gave a presentation last week using a lot of EV hype. This was clearly designed to assure the financial markets. VW said it will systematically work on increasing its efficiency with ACCELERATE – its latest reorganization.* The targeted operating margin of at least 6% is expected to be achieved by 2023 and will be secured long term. Time and financial results will tell.

VW says it is becoming more resilient to fluctuations in the market that have pummeled it for the past couple of years. To achieve this, Volkswagen is seeking to trim its fixed costs by 5% before 2023, increase factory productivity by 5% per year, optimize material costs by 7% and bring all regions into the black in the long term. In South America and the United States, Volkswagen is trying to break even in the current fiscal year. The company says it can now post a profit in North America with a decrease in sales volumes of around 15% and in South America with sales volumes down by as much as 30%.

Its latest strategy says that ‘by turning the vehicle into a software-based product, Volkswagen is setting the scene for new, data-based business models aimed at lowering entry barriers to individual mobility while offering very attractive service packages for the customers. Volkswagen thus aims to generate additional revenue over the service life of the vehicle through charging and energy services, through software-based functions that customers can reserve as needed, or through automated driving.”

VW said it will also make the structure of the vehicle portfolio much less complex. Future vehicle generations will be produced with a much small number of versions. The individual configuration will no longer be set through the hardware when the vehicle is purchased. “The vehicle will have virtually everything on board and customers can add desired functions on demand at any time using the digital ecosystem in the vehicle. This will significantly reduce production complexity.”

Volkswagen plans to rapidly accelerate the global e-campaign once again: by 2030, the brand will increase its market share to +70% of deliveries of all-electric cars in Europe – double the previous planning target of 35%. In the United States and China, the brand is targeting an EV market share of over 50% in the same period. To achieve this, Volkswagen will bring out at least one new BEV model every year. The all-wheel-drive ID.4 GTX1 will kick things off in the first half of 2021, followed by the sporty ID.51 in the second half of the year. The ID.6 X / Cross1, a seven-seater electric SUV for the Chinese market, will be launched in autumn. Plans for an electric car under the ID.32 – with an entry-level price starting at €20,000 – are pushed up by two years to 2025.

Volkswagen says it will continuously optimize the Modular Electric Drive Toolkit (MEB) with improvements in acceleration, charging capacity and range. Volkswagen will also play to its strengths as a platform champion in the next generation of a high-performance all-electric drive toolkit for flat vehicles – the Scalable Systems Platform. This will be deployed in 2026 for the first time in a flagship project dubbed Trinity. The vehicle will set new standards in three respects: autonomous and connected car technologically, in terms of the business model 2.0, and with new production approaches at the Wolfsburg plant.

The combustion engine fleet will also be developed in parallel to the acceleration of the e-campaign. All of the core models, including the Golf, Tiguan, Passat, Tayron and T-ROC, will get another successor. CEO Ralf Brandstätter said “,We will still need combustion engines for a while, but they should be as efficient as possible, which is why the next generation of our core products – all of which are world models – will also be fitted with the latest generation of plug-in hybrid technology, with an electric range of up to 100 kilometers.”

* Volkswagen Reorganizations or Changes in Strategy

Back in 2016, Volkswagen kicked off its what it claimed was a far-reaching transformation and the industry’s biggest electric offensive with the TRANSFORM 2025+ strategy (U.S. Court Grants $14.7 Billion Plea in VW Diesel Fraud Case. Criminal Charges, Fines, Stockholder Lawsuits Outstanding).

Then in November of 2019 it tweaked the strategy (Volkswagen Group Debuts Investment Plan for 2020-2024). Then Group plans were to spend nearly €60 billion on hybridization, electric mobility and digitalization in the next five years. This is slightly more than 40% of the company’s investments in property, plant and equipment and all research and development costs during the period. Compared with the Group’s last Planning Round, it’s an increase of around 10%. The Group intends to invest around €33 billion of this in electric mobility. (Drinking the Electrolyte? Audi Plans to Sell 800K EVs in 2025)

Volkswagen’s Footnotes

1 Vehicles are not offered for sale.
2 ID.3 – power consumption (combined) in kWh/100 km (NEDC): 17.7 — 14.5; CO2 emissions (combined) in g/km: 0; efficiency class: A+

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