• Operating return of at least 6 percent as early as 2022
  • Numerous additional measures to improve efficiency planned
  • Future investments of EUR11bn through 2023, of which EUR9bn spent on e-mobility
  • COO Ralf Brandstaetter: "We must force the pace of our transformation"
VW will rationalise its range by axing unpopular powertrain combinations

VW will rationalise its range by axing unpopular powertrain combinations

The Volkswagen brand is to significantly improve its earnings performance in the coming years in order to finance investments in future technology from its own resources, executives said at a year-end press conference in Germany on Thursday.

The model range is being streamlined and the number of variants reduced. Plant productivity will be increased and the platform orientation for vehicle production extended.

Optimising material costs is to contribute significantly to achieving the target return – without detracting from product quality.

Administration processes will become even leaner.

"We must force the pace of our transformation and become more efficient and agile. We cannot let up in our efforts and must realise further substantial improvements. What we have achieved so far is still not enough," said Ralf Brandstaetter, the brand's chief operating officer.

The Volkswagen brand will be spending EUR11bn on e-mobility, digitalisation, autonomous driving and mobility services from 2019 to 2023, of which EUR9bn will be go on the electrification offensive.

The brand currently offers two full-electric cars - variants of the Up and Golf lines. This will increase to around 20 by 2025 with planned production set at over 1m units. Work on converting the Zwickau plant to run exclusively as an electric mobility site is already under way and, in addition the plants in Emden and Hanover, will switch to the production of electric vehicles from 2022. Collectively, these three sites will become Europe's largest e-production network. Two electric vehicle plants are also currently taking shape in Anting and Foshan in China, with production scheduled to commence in 2020. For North America, the brand plans to make a decision on a production location for electric vehicles soon.

With the fully-electric ID1 made in Zwickau, where the order process features pre-booking for the first time, Volkswagen claims to be putting a new generation of vehicles on the road that also sets standards in digitalisation and connectivity.

"With the ID, the dawning of the e-mobility era and connectivity for our brand becomes tangible for our customers, too. The ID will be the first fully-connected, fully-electric car and will be a symbol of the 'New Volkswagen'", sales chief Juergen Stackmann said.

VW will also be investing strongly in digitalisation. The automotive cloud developed together with partners lays the groundwork for offering an ever-growing range of digital services in fully-connected vehicles. The aim is to create the world's largest automotive ecosystem.

In order to finance the enormous future investments, the brand will have to achieve even higher cost savings than previously planned.

"We have therefore defined a bundle of measures to improve profitability that will safeguard the full implementation of the pact for the future while also supplementing the topics of the pact and setting the right course for 2025," CFO Arno Antlitz said.

The pact for the future will achieve cost savings of EUR2.2bn by the end of 2018. That means the lion's share of the planned total savings of EUR3bn by 2020 will already have been achieved. Further massive savings are expected from measures such as the strong expansion of the platform model. Currently, approximately 60% of the conventional models are based on the Modular Transverse Toolkit (MQB), and this is set to increase to around 80% by 2020. VW has already built over 50m on the MQB, and the group is projecting a similar volume for the coming years. As many as 15m group vehicles based on MEB are to leave the assembly line under the first wave of electric models from 2019.

Another lever is plant productivity, where an average increase of 30% is planned for the period to 2025.

At the same time there is to be a "massive reduction" in the complexity of the model line. In Europe, the brand will be axing 25% of the engine/transmission variants with low customer demand in the coming model year, with corresponding positive effects on the complexity of production and the supply chain.

These and further measures such as optimising material costs should contribute towards boosting the operating return more swiftly than originally planned.

"We are confident that we will be able to reach our target of an operating return of at least 6% in 2022, three years earlier than originally planned," Antlitz said.

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