Volkswagen has restated the importance of its platform strategy across its brands as key to growing its scale in e-mobility. Annual shareholder day presentations today in Wolfsburg stressed that hardware, software, batteries and charging as well as mobility services of all VW Group brands are to be based on largely standardized technical foundations in future.
Volkswagen also said its ‘big electric offensive’ is working. In 2020, the VW Group more than tripled its sales of all-electric vehicles (to 230,000 units) and aims to sell 1m electrified vehicles (BEVs + PHEVs) in 2021 (versus 422,100 in 2020 and just 142,900 in 2019). The group also aims to be the global market leader for electric mobility ‘by 2025 at the latest’.
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VW Group is planning to invest around €46bn in electric mobility and the hybridization of its fleet in the next five years. By 2030, the share of all-electric vehicles in Europe is set to rise to up to 60%, VW said. However, VW also refused to commit to a fixed end date for combustion engine technology, ‘with reference to regional differences in primary energy usage and regulatory conditions..’. Diess said in his presentation that VW will keep selling ICEs in some regions longer than in others. “E-mobility will come at different levels of speed globally. Depending on local policies and the supply of CO2-free primary energy,” he said.
Platforms
Currently, the Modular Electric Drive Toolkit (MEB) e-mobility platform is being scaled up worldwide with production in Europe, China and the USA. By 2022, 27 MEB-based models will be offered throughout the group. In addition, as early as next year, VW Group says it will launch its first vehicles based on the Premium Platform Electric (PPE), that it says will bring faster acceleration, higher ranges and shorter charging times.
By the middle of the decade, the VW Group wants to develop the Scalable Systems Platform (SSP), the next generation of all-electric, fully digital and highly scalable vehicle platforms, on which models of all brands and segments can then be built.
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By GlobalDataVW said its new platform roadmap has four elements: Hardware, software, batteries and charging, as well as mobility services. This, it is claimed, is how the Volkswagen Group will reduce complexity, leverage economies of scale and synergies between brands, and generally accelerate the VW Group’s transformation, ‘which has already begun’.
Herbert Diess said that electrification and digitalization are changing the vehicle faster and more radically than ever before. “Economies of scale are absolutely critical for both issues,” he said. “Our platform roadmap will put us in an even better position to tap the full potential of our group alliance. By pooling the strengths of our strong brands, we will thus be able to scale up our future technologies even faster and maximize the number of people benefiting from them.”
For on-board connectivity and software, Volkswagen is aiming to achieve synergy effects across all brands in the coming years via its VW.OS operating system supplied by Car.Software-Org., which was established in 2020. Version 1.2 is set to follow in the PPE. Version 2.0 will subsequently be rolled out throughout the group with the SSP. By then, VW says the in-house share of car software development is set to rise from the current 10% to 60%. Car.Software-Org. is also developing the technical foundations for autonomous driving, data-based business models and new mobility services.
In addition, Volkswagen says it is also pursuing a platform strategy for batteries and charging. From 2023, the VW Group will introduce a unified cell to be scaled up around the world. By 2030, the unified cell is to be installed in around 80% of all the group’s electric vehicles across brands. Volkswagen claims it will thus reduce the cost of battery cells by up to 50% in the entry-level segment and by up to 30% in the volume segment. To ensure that demand for battery cells can be met, Volkswagen and its partners plan to build six cell factories with a total capacity of 240 gigawatt hours in Europe by the end of the decade.
The fourth element of the new platform roadmap comprises mobility services and other services. These include, among others, the MOIA ride pooling service, the WeShare car sharing offering and flexible subscription services from Volkswagen Bank. As it evolves its service offerings, Volkswagen is acquiring systems expertise which it is developing with partners as necessary.
Diess told shareholders that Volkswagen will also be the platform champion in the new world of mobility. “Our roadmap clearly sets out how this will be achieved, allowing us to accelerate our transformation into a software-driven mobility group. We will embark on this journey with a newly configured Board of Management and on a solid financial foundation. Our good performance in 2020, a year dominated by crisis, will give us added momentum.”
2020 results
VW Group said it delivered around 15% fewer cars last year than in 2019. With €222.9bn, VW Group sales revenue in 2020 was down 11.8% year-on-year. In the first half of the year, the sales revenue came in at 23.2% below 2019. In the second half of the year, group sales revenue was back up to the prior-year level, with a strong momentum in the fourth quarter, VW said. Volkswagen Group ended the year with an operating profit before special items, of €10.6bn, down €8.7bn on previous year (-45%). With this result, VW said it significantly exceeded the expectations it had in April/May for the calendar year 2020. VW said it saw a strong recovery in the second half of 2020, and an exceptionally strong fourth quarter with operating profit before special items of €8.2bn, equaling a return on sales of 12.2%.
Frank Witter, member of the Group Board of Management responsible for Finance and IT, said: “The Volkswagen Group again proved its robustness in 2020, despite the continuing challenges posed by the Covid-19 pandemic. Our operating profit before special items of more than €10 billion significantly exceeded the expectations at the peak of the pandemic in spring 2020. We are very satisfied that – despite the pandemic – the Volkswagen Group met its strategic target of generating clean cash flow of more than €10 billion in 2020.”
VW said China, its most important single market, recovered quickly and proved itself as an anchor of stability in the crisis. All group brands represented there achieved positive results. In South America, the company increased its market share to a new record of more than 14% and the group expects a return to profitability there in the current fiscal year.
Five years on from the diesel crisis, Volkswagen says it has staged a comeback in North America with a large number of new models tailored to the US market.
In Europe, unit sales of electric vehicles rose sharply following the launch of the ID.3. The share of electric vehicles in Western Europe increased to 10.5% of overall deliveries (2019: 1.9%).
Despite the resulting significant progress in reducing its CO2 fleet emissions in Europe, VW acknowledged it narrowly missed its target by around 0.8 g/km for the pool operated with other partners. This value is based on updated calculations compared with the provisional figures communicated in January. The final results will be publicized by the EU later in the year. In the current year, the VW Group expects to achieve the CO2 target in Europe due to the substantially growing share of electrified vehicles.
2021 outlook
In its outlook for 2021 the Volkswagen Group anticipates that its business will ‘recover significantly’ compared with the previous year – assuming successful containment of the Covid-19 pandemic. For subsequent years, the Volkswagen Group aims to further improve its profitability, the goal being to bring the operating return on sales back into the target corridor of 7-8%. The continuing recovery of unit sales as well as increased cost discipline will be contributing factors in this process. Fixed costs (excluding R&D and capex) are expected to decline from 2020 levels by around €2 billion or 5% by 2023. The aim is to reduce material costs by 7% by the same time. The VW Group is planning to lower the R&D and capex ratios in the Automotive Division to around 6% each by 2025. In addition, intragroup financial management is in future to be based on a matrix of brands as well as electric, software and mobility platforms.
Arno Antlitz, who is currently the member of the Board of Management of Audi AG responsible for Finance and Legal Affairs and will succeed Frank Witter as the Group’s CFO on April 1. He said: “We aim to put the ambitious transformation of the Volkswagen Group on a solid financial basis. The focus is firstly on allocating and redirecting resources and capital to electrification, digitalization and mobility services. Secondly, we want to secure and reinforce our financial foundation by taking measures on the income and cost side that will enable us to make the investments in future technologies.”
‘e-mobility has won the race’
CEO Herbert Diess told shareholders that e-mobility has won the race and that there is a transformation from ‘old auto’ to ‘new auto’ – but that the transfromation will take two product lifecycles. “‘New Auto’ includes the switch to electric drives, which is the easier part, and to software: turning the car into a connected and autonomous device. In 2030, we foresee a 50% BEV share in our global deliveries. In Europe we expect around 60 percent. In 2035, the majority of vehicles will be electric. And around 40% of cars will drive autonomously,” he said.
Diess also said that financing the transition to ‘New Auto’ will be based on selling highly efficient combustion engine cars. “Over the whole period, we will optimize the ICE business with fewer models, better price mix, lower fix costs. Leading to higher profitability. As a result, we can shift additional funds towards ‘New Auto’,” he said.
See also: VW eyes 50% drop in battery costs by 2030
