VW aims for e-mobility, digital superiority

Reorientation, or righting the ship, will be done in three phases

Published: November 26, 2016, 10:30 PM
Updated: November 30, 2016, 6:22 AM

Volkswagen Grille logo

In the aftermath of its diesel scandal, Volkswagen has set out its roadmap over the coming decade, which includes consistent restructuring, increased operating margins, and a desire to develop the industry’s strongest digital ecosystem and to sell a million electric cars per year, all by 2025.

2018 Volkswagen Atlas

Volkswagen calls it TRANSFORM 2025-plus, a strategy that focuses on brand positioning across the various vehicle segments and distribution regions, supported by improvements in efficiency and productivity. If that sounds like the way every business runs, that’s because it is, with Volkswagen hoping to make its gains though e-mobility and connectivity (supported by lots of cash).

“Our goals are high and our strategy is very ambitious. We want to benefit from change and to take Volkswagen into the lead in the new automobile industry with determination,” said VW-brand Chairman of the Board of Management, Dr Herbert Diess, at the state of the brand address Wolfsburg. “Over the next few years, Volkswagen will change radically. Very few things will stay as they are. In the final resort, the new strategy is a major transformation program.”

Volkswagen Tiguan GTE Active Concept

The reorientation, otherwise known as righting the ship, will be done in three phases. In phase 1 (leading up to the end of this decade), the core business of the company will be completely restructured. Phase 2 (for the following five years), will see Volkswagen surge to the lead in e-mobility with the emphasis on volume profitability. And Phase 3 (beyond 2025) will have the company again lead the world in product, with the aim of achieving that goal by 2030.

That goal will come with the intent of becoming “top of volume” globally, making the company look beyond its vision of becoming tops in China and Europe (arguably a big chunk of the overall global sales race) to become a volume seller in North America and not just a niche supplier.

To that end, it has started the ball rolling with the launch of Atlas in the SUV market, which the company cites as the first phase of its product offensive. It will also push its larger sedans more vigorously on the continent. The second phase will key in on electrification.

2016 Paris Motor Show - One of the most radical cars in Paris this month was the Volkswagen I.D. – a completely electric vehicle that is the first VW designed for completely autonomous driving. It’s scheduled to go into production in 2020.

“From 2020, we will be launching our major e-mobility offensive. As a volume manufacturer, we intend to play a key role in the breakthrough of the electric car,” said Diess. “We are not aiming for niche products but for the heart of the automobile market. By 2025, we want to sell a million electric cars per year and to be the world market leader in e-mobility. Our future electric cars will be the new trademark of Volkswagen.”

The company hopes to free up over €2.5 billion (about $3.6 billion, all figures in Canadian dollars) to finance its e-mobility aspirations by discontinuing low-volume, low-earning conventional models or low selling variants of more popular models.

VW Crossblue concept

The company expects to introduce North America to its electric models after 2020, in addition to investing significantly in the electric infrastructure, and also to produce electric vehicles on the continent.

Volkswagen also intends to develop its own digital platform, with a comprehensive range of services. It expects to have about 80 million users by 2025, making it the leading digital ecosystem in the auto industry. It estimates revenue from the digital services to reach about €1 billion per year (about $1.4 billion).

Overall, the company expects to take its operating margin from the current level to 4% by 2020 and then 6% by 2025. It is aiming for annual earnings of €3.7 billion (over $5.3 billion) by 2020, as it keeps its investments at a stable about €4.5 billion per year (about $6.5 billion).