Volkswagen is accelerating its transformation into a software-driven mobility provider. By rolling out the ACCELERATE strategy that it has just unveiled, the company will systematically prepare for the profound changes in the automotive industry in good time.
In implementing data-based business models, the company is seeking to attract new groups of customers and tap additional sources of income. Volkswagen also will make autonomous driving available to many people before the end of the decade.
Back in 2016, Volkswagen kicked off its far-reaching transformation and the industry’s biggest electric offensive with the TRANSFORM 2025 strategy. With ACCELERATE Volkswagen now aims to transform itself into “the most attractive brand for sustainable mobility”. The company is pursuing three strategic value drivers for the accelerated transformation – “brand value”, “scalable platforms” and “valuable enterprise”, each of which is underpinned by specific measures and ambitious goals.
Software integration to become a Volkswagen core competency
The company’s high volumes will ensure the necessary scaling of the software in the Group. Integration of software into the vehicle and the digital customer experience will thus become core competencies of Volkswagen. To this end, Volkswagen is spearheading the development of the customer-centric digital ecosystem, with the ID. Family blazing the trail. For this, Volkswagen has established the ID. Digital agile project unit that will provide “over-the-air” updates every 12 weeks starting in summer 2021. These will enable the vehicle to remain up to date throughout its life cycle and become better and better with new functions. A fully networked fleet of over 500,000 vehicles is expected to be on the road in just two years’ time, through which Volkswagen will be able to transmit direct customer feedback to new functions.
Business model 2.0: new customers and additional sources of income
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.
The company 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.
Clear plan for driving up profitability
Volkswagen has earmarked around 16 billion euros for investment in the future trends of e-mobility, hybridization and digitalization up to 2025. To be able to finance the sizable future investments, the company will systematically work on increasing its efficiency with ACCELERATE. The targeted operating margin of at least 6 percent is expected to be achieved by 2023 and also secured long term.
The focus here will be on becoming more resilient to fluctuations in the market. To achieve this, Volkswagen is seeking to trim its fixed costs by 5 percent before 2023, increase factory productivity by 5 percent per year, optimize material costs by 7 percent and bring all regions into the black in the long term. In South America and the United States, Volkswagen is striving to break even in the current fiscal year. The company can now post a profit in North America with a decrease in sales volumes of around 15 percent and in South America with sales volumes down by as much as 30 percent.