VW lays out historic transformation strategy

The Volkswagen Group has set out its strategy to evolve into a world leader in sustainable mobility by announcing its future vision, ‘TOGETHER – Strategy 2025.’

Described as the biggest change strategy in the group’s history, ‘TOGETHER – Strategy 2025’ sets out to comprehensively transform the core automotive business into a new mobility solutions business.

CEO Matthias Müller said, ‘Our future program ‘TOGETHER – Strategy 2025’ will make the Volkswagen Group more focused, efficient, innovative, customer-driven and sustainable – and systematically geared to generating profitable growth. This can only be achieved together, while being fully aware of our responsibility toward society and the environment.

‘TOGETHER – Strategy 2025’ provides the framework and compass for the Volkswagen Group’s envisioned evolution from car manufacturer into a world-leading provider of sustainable mobility.’

The group will present a detailed strategic programme, broken down into brands and functions and backed up with specific measures and financial targets, before the end of the year.

‘TOGETHER – Strategy 2025’ will follow key building blocks to achieve ‘a fundamental realignment in readiness for the new age of mobility’. For this, Volkswagen will sharpen the positioning of its brands and optimize the vehicle and drivetrain portfolio to focus on the most attractive and fastest-growing market segments. Its product portfolio of around 340 different models will also be systematically geared to profitable growth, taking regional market and customer needs into account.

With regard to vehicles, special emphasis will be place on e-mobility with the intended launch of more than 30 purely battery-powered electric vehicles (BEVs) over the next 10 years. These are intended to generate up to 25 per cent of total sales by 2025.

The regional growth strategy already initiated in particularly attractive automotive markets is being continued, with continued expansion in North America and China through a policy of partnership with regional players. It says talks in this regard are at an advanced stage.

New competencies will be another lever for transforming the core automotive business, with one stated aim being to license a competitive self-driving system (SDS) developed in-house by the end of the decade. It also wants to develop battery technology as a new competency.

The group will also realign the components business to encourage an entrepreneurial mind-set while the Financial Services Division will also be a significant source of earnings.

The CEO continued, ‘Developing, building and selling vehicles, including the related financial services, will remain essential for the Volkswagen Group going forward. However, the transformation we have initiated today will permanently change the face of our core business, ensuring that we remain a leading player over both the medium and the long term.

‘As is traditional in the Volkswagen Group, we will take a responsible, collaborative approach. Such far-reaching change as we have set out to achieve is only possible together,” said CEO Matthias Müller.’

The second key building block of ‘TOGETHER – Strategy 2025 involves the establishment of a cross-brand mobility solutions business. The new unit will develop and acquire offerings tailored to customer requirements – centering on ride hailing, ie on-demand mobility services. Other services such as robotaxis, car sharing and transport on-demand will then be grouped around this nucleus. Volkswagen’s aim is for the new mobility solutions business unit to generate sales revenue in the billions by 2025.

To find the double-digit billions required to fund this transformation strategy, plans to streamline every aspect of its business, aiming for a ratio of capex to sales revenue in the automotive business of six per cent by 2025. Overall, the Volkswagen Group expects more efficient use of resources to generate the potential for a significant annual improvement in earnings. The individual measures at Group, brand and divisional level will be set out in detail in coming months.

‘Strategy 2025’ also sets out amended financial targets, which includes raising the group’s operating return on sales from six per cent in 2015 to between seven and eight per cent in 2025. The return on capital employed in the Automotive Division is then intended to be more than 15 per cent.

CEO Matthias Müller, said, ‘The Volkswagen of the future will inspire its customers with fascinating vehicles, financial services tailored to demand, and smart mobility solutions. We will be a technology leader and role model when it comes to environment, safety and integrity. The Group will achieve competitive profitability, and so remain both an attractive investment and an excellent, reliable and secure employer. In short, Volkswagen will be an enterprise we can all be proud of.’

Meanwhile, former Volkswagen boss Martin Winterkorn is under investigation in Germany for alleged market manipulation.