VW Group (Part 2): Investing EUR 60 billion in hybrid, electric and digital in 2020-2024

Alliance with Ford to be extended from LCVs to autonomous driving and electrification

2019/12/17

Summary

ID. SPACE VIZZION
ID. SPACE VIZZION concept car, the seventh model of ID. family (Source: VW)

 In its medium-term business plan “Together 2025+” revised in June 2019, the VW Group intends to accelerate its transformation and achieve its strategy targets systematically for “shaping mobility – for generations to come”. In particular, the Group will strive for lean Group structure, sharpening brand portfolio to increase the value of the brands, and development of vehicles and services as software products. In November 2019, the Group confirmed its financial targets set out in the business plan. Operating return on sales before special items is expected to be 7-8% and return on investment in the automotive division should exceed 14% by 2025. Capex and R&D cost are anticipated to be 6% of sales revenue from 2020 onward.

 According to its investment plan for future technologies altered in November 2019, the VW Group plans to invest nearly EUR 60 billion in hybridization, electric mobility and digitalization for the next five years through 2024 (EUR 44 billion through 2023 in the previous plan). EUR 33 billion of this figure will be spent for electric mobility alone (EUR 30 billion in the previous plan). The 10-year electrification initiative was also modified. Through 2029, the Group plans to launch 75 EV models (70 models through 2028) along with 60 HV models, and deliver 26 million EVs (22 million through 2028) and 6 million HVs.

 The VW Group is converting and building plants to implement its plan to produce EVs at 18 plants in Europe, the U.S. and China by 2022. The Zwickau plant in Germany, which was renovated with an investment of EUR 1.2 billion, will be the center of production for EVs using the MEB platform developed by VW exclusively for EVs. SAIC-VW’s Anting plant (Shanghai) and FAW-VW’s Foshan plant in China as well as the Chattanooga plant in the U.S. will be the bases for building MEB-based EVs.

 In the field of autonomous driving, the VW Group called off its partnership with Aurora Innovation and invested in Ford’s subsidiary Argo AI. The Group continues to intensify its partnership with Microsoft regarding development of VW’s automotive cloud as the basis for the connected cars. In addition, VW established a software development unit within the company, intending to increase the in-house share of software development. As for mobility services, VW is expanding its car sharing services in Europe and started a subscription business in India. Audi is offering several mobility solutions under the Audi on Demand brand in Europe and an online ride-hailing service in China.

 The VW Group and Ford have been expanding their alliance. The two companies agreed to collaborate on engineering and production of light commercial vehicles in January 2019, and extend their alliance to include an autonomous driving technology and electrification plan in July of the same year. VW invested in Ford’s self-driving system development subsidiary, while Ford uses VW’s MEB platform dedicated for EVs. In October, the two companies agreed on a partnership for a charging network in the U.S.


 Please refer to Part 1 of this VW Group series regarding sales volume and financial results for the period January-September 2019, outlook for 2019, new model launch plan, Chinese and the U.S. market, and LMC Automotive’s production forecast.

 

Related Reports:
VW Group (Part 1): Expanding SUV lineup, accelerating NEV offensive in China (Dec. 2019)
German OEM Electrification Strategies, Including EV Product Timelines (Oct. 2019)
Frankfurt Motor Show 2019: European OEMs (Sep. 2019)
VW Group (Part 2): Building EVs at 16 plants worldwide by 2022 (Nov. 2018)
VW Group (Part 1): Reorganizing operations into 7 business units (Nov. 2018)