In the midst of a new era for the automotive industry, Volkswagen can report pleasing numbers. A resolute e-strategy, close internal cooperation and determined efficiency improvements are the cornerstones of success. Nevertheless, the pressure to innovate will continue to rise.
The automotive industry is in the midst of a turning point in history. The challenges are enormous – climate change is increasing the pressure to innovate in order to achieve zero-emission driving. And digitalization is fundamentally changing the automobile.
Given the highly dynamic transformation process in which Volkswagen finds itself, the Group has progressed positively of late. In 2019, analysts gained new confidence in the drivetrain strategy and the determined drive towards electric mobility. “We think VW is the best-positioned player in the industry to master the CO2 challenge”, was recently attested by financial services expert Kepler Cheuvreux.
The sales and earnings figures were also pleasing. With slightly lower deliveries, the Group was able to increase its operating profit in the first three quarters of 2019 by 11.2 percent compared to the same period last year. And in China, Volkswagen even increased its market share by 1.4 percent in a sharply declining market.
An important pillar of this interim success is the early and determined promotion of e-mobility as the most suitable drive system for the passenger car sector in the medium term – the core element is the newly developed modular electric drive matrix (MEB). In addition, unity is another major strength of the Volkswagen Group. All brands have a common approach to the development and implementation of future technologies, particularly e-mobility, and cooperate closely with one another. In this way, they also benefit from economies of scale within the Group.
What is MEB?
The modular electric drive matrix (MEB) is a modular system for manufacturing electric vehicles developed by Volkswagen. It is the successor to the Modular Transverse Matrix (MQB), which in 2012 represented a radical technological revolution in car production: the platform principle was replaced by a flexible modular system that made vehicle construction even more efficient.
MEB is the next big step: since 2015 it has been developed to further optimize the strengths of the MQB – with regard to electromobility.
A specially developed modular system such as the MEB makes the production of electric cars more efficient in the long term and therefore more cost-effective. The MEB will be scaled across the Group and also offered for use by other car manufacturers.
According to the “TRANSFORM 2025+” strategy, Volkswagen aims to sell one million e-cars per year in 2025, spread across around 30 different models across the Group brands. This goal is closely related to the MEB: Mass production of e-cars is only possible on the basis of the new modular system. So, it is much more than just engineering details: the modular e-drive system is an investment in the future of mobility.
Production: from cost driver to success factor
Volkswagen is also energetically driving its profitability forward – Group CEO Herbert Diess sees a total efficiency potential of 2.6 billion euros by 2025 alone. For a volume manufacturer like Volkswagen, production is by far the most important adjustment screw. The Volkswagen brand alone wants to achieve a competitive return of at least six percent through increased efficiency, in order to be able to make important investments in the future from its current business. The new production strategy “TRANSFORM.TOGETHER” serves the central goal of increasing productivity by 30 percent by 2025 – with improvements in eight central areas of activity such as the launch of products and factory adjustments. In the adjustment area alone, the Volkswagen brand has already succeeded in significantly reducing the effort required to ensure its high-quality standards and has saved around €130 million per year since 2016. The initiative has now been adopted by other Group brands as well.
The progress is already visible. The production division alone achieved cost reductions of around €500 million in 2019. Between 2019 and 2023 a total of two billion euros is to be generated. The brand’s global return on sales improved to five percent, exceeding its own expectations. CO2 emissions per vehicle produced were already reduced by 22 percent in 2019 compared to 2015 levels. By 2025, emissions are to be halved.
Future lies in the digital tech-Group
Despite all the positive trends, the rapid change from a purely automotive, to a digital auto-tech-Group remains a huge challenge for Volkswagen. “In the future, the automobile will be the most complex, most valuable internet device suitable for the masses,” said Group CEO Herbert Diess a few weeks ago. “The future of Volkswagen lies in the digital tech-Group – and only there.” Diess went on to say, “In all honesty, it also means: the storm is just beginning.”
Against this backdrop, the Group CEO calls for a further increase in speed and more “courage to take powerful and, if necessary, radical changes in course.” “If we continue at our current pace, it will be very tight,” Diess said. What the Group needs now is “to make use of our strengths, but also to leave out and abandon everything unnecessary that does not move us forward.”
Diess is demanding binding expansion plans for the charging infrastructure from the EU in order to quickly make climate-friendly electromobility capable of gaining acceptance by the masses. A “European e-mobility master plan” is needed, the Group CEO recently said in Brussels. Diess also advocated a uniform CO2 price for all sectors – a price that would encourage industry and consumers to reduce their CO2 footprint more strongly. Diess described the still high share of coal-fired power generation in Eastern Europe and Germany as the “biggest problem” on the road to climate neutrality. “We need a European coal phase-out plan with binding phase-out dates for each member state. The power supply for electric cars must be CO2-free,” said Diess. This is the only way to achieve climate goals. Volkswagen is investing around 33 billion euros in electric mobility across the Group in the coming years. By 2050, the Group wants to bring the CO2 emissions of its fleet to zero.