VW Group (Part 2): implementing new "Together - Strategy 2025" plan

Launching 30 EV models and selling 2-3 million units annually by 2025

2017/07/07

Summary

Audi
e-tron Sportback concept
The Audi e-tron Sportback concept (four-door Gran Turismo EV)

  The VW Group's "Together - Strategy 2025" plan for the future that was released in June 2016 illustrates how it aims to be a global leader in providing sustainable mobility over the coming years. The guideline clarifies challenges and objectives in four key areas: transforming core business as an automaker, building new mobility solutions businesses including on-demand mobility and car sharing, strengthening innovation power in the field of digitalization and AI technology, and securing funding.

  In its new model launch plan, VW Group will expand and update its SUV lineup, which is seeing increasing demand around the world. The VW brand plans to release a Tiguan long-wheelbase model, Golf-based T-Roc compact SUV, and highest grade Touareg SUV in 2017. The Audi brand will introduce its highest grade SUV, the Q8, in 2018 followed by the Q4 compact CUV in 2019.

  In the aftermath of its emissions scandal, the VW Group shifted its focus from diesel engines to electrification to comply with environmental regulations. The Group plans to launch a total of 10 electric vehicles (EVs) and plug-in-hybrids (PHVs) by 2018 and 30 battery-powered EVs by 2025. These EVs are expected to cover various segments and all of the Group's brands. It aims to sell two to three million EVs annually by 2025.

  In China which is the largest market for the VW Group, it plans to increase sales by expanding its SUV lineup and launching new energy vehicles (NEVs) including EVs and PHVs. Two-thirds of the Group's global EV sales will come from China.

  In the U.S. market where the VW Group reached settlements in most of the disputes related to its diesel scandal, the VW brand intends to recover competitiveness through introduction of new SUVs including the Atlas and Tiguan long-wheelbase model in 2017. The Audi brand, which has enjoyed six consecutive years of sales growth in the U.S., will release the A5/S5 midsize coupe/convertible and Q5/SQ5 midsize SUV in 2017. The Q5 is being manufactured at Audi's new plant in Mexico which the company opened in September 2016, its first plant on the North American continent.

  The VW Group's unit sales and business results for 2016 and the first quarter of 2017, as well as unfolding of the diesel scandal are described in the prior report in this series.

Related Reports:
VW Group (Part 1): 2017 sales revenue to increase by up to 4% (Jun. 2017)



The VW Group's new "Together - Strategy 2025"

  VW Group unveiled its "Together - Strategy 2025" plan in June 2016. This is the first medium term business strategy disclosed by the Group since the emissions scandals and indicates the direction of its operations in the coming 10 years.

  The new Group strategy clarifies challenges and goals in four key areas: transforming core businesses, building mobility solutions businesses, strengthening innovation, and securing funding. Regarding the Group's core business of producing and marketing vehicles, it plans to launch a large number of SUVs to complement its product portfolio and to release electrified vehicles to meet stricter environmental regulations. The VW Group shifted focus from diesel to electrification after its emissions scandal and plans to launch more than 30 types of battery-powered electric vehicles (BEVs) by 2025. The Group will also develop in-house technologies for batteries. In China and other emerging countries, the Group will tap the entry segment by forging partnerships with local companies.

  In the area of mobility solutions businesses, VW Group will form a partnership with a company that provides on-demand transportation services via an app and establish a new business unit for mobility services. Challenges for strengthening innovation include digitalization and extensive use of AI technology. In order to secure funding, the Group plans to reduce both CAPEX and R&D ratios to 6% or less. Meanwhile, the Group aims to achieve an operating margin of between 7% and 8% as well as a return on investment (ROI) of 15% or more by 2025.

VW Group's new future program "Together - Strategy 2025" released on June 17, 2016

Transform core business * Accelerate SUV launches with 7 new models in 2017
* Expand e-portfolio: launch 10 electrified models by 2018 ; release more than 30 types of BEVs and sell between two and three million BEVs annually (20-25% of total unit sales) by 2025
* Develop battery technology: from Li-ion to solid state batteries; start pilot production in 2020
* Economy segment models: develop low-priced EVs with JAC by 2018 and economy segment vehicles with Tata by 2019
* Develop self-driving system: launch own self-driving system by 2021
* Realign components business
Build mobility solutions business * Expand vehicle-on-demand services; establish car-sharing and mobility services business via MOIA, a new mobility solutions service unit established in December 2016, and Gett, a ride-hailing service company that VW partnered with in May 2016. Mobility services businesses are expected to contribute billions in earnings by 2025.
Strengthen innovation power Through partnerships with other companies:
* Digitalization across all areas and brands from production to points of contact with customers
* Extensive use of artificial intelligence (AI)
Secure funding * Reduce both CAPEX and R&D ratios to 6% or less by 2025 to generate funds for future investments in new fields.
* Goals by 2025: operating margin to be between 7% and 8%; return on investment (ROI) of the Automotive Division to be 15% or more
Source: Presentation of Annual Media Conference and Investor Conference 2017

VW Group's activities in the field of mobility services

Partnership with Gett In May 2016, VW Group formed a partnership with Gett, an on-demand mobility venture and established a new business unit for mobility solutions including car sharing and ride hailing. The Group's aim is for the new unit to generate sales revenue in the billions by 2025.
Establishment of a new business unit MOIA VW Group established MOIA, its new mobility services company, in December 2016. This unit provides mobility services for individuals under the assumption that not everyone will own a car in the future. It plans to start its business with ride hailing via an app. The first pilot project is scheduled to begin in 2017.

The VW Group's partnerships formed in the fields of connected cars, semiconductors and navigation

LG Electronics
(connected car platform)
In July 2016, VW Group announced that it would forge a partnership with Korea-based LG Electronics to jointly develop a next-generation connected car service platform. The two companies will work together on development of a notification center that can deliver messages to the driver in an intuitive and safe manner; technologies that bring together the connected car and the smart home; and next-generation infotainment technology for connected cars.
Infineon
(semiconductor)
In February 2017 VW announced its selection of Infineon Technologies, a leading German semiconductor supplier, as the first partner for its strategic semiconductor program. The program aims to develop technology solutions for future vehicle generations. A modern automobile is equipped with as many as 100 networked electronic control units (ECU) and thousands of electronic components, and as a result, the automaker is cooperating directly with chip manufacturers to develop innovative semiconductors.
Mobileye
(next-generation navigation system)
VW and Mobileye signed an agreement regarding a next-generation navigation system for autonomous driving in February 2017. Mobileye will provide its Road Experience Management (REM), a camera-based map and localization technology, to VW vehicles starting in 2018. VW vehicles equipped with this technology will acquire road information via Mobileye's sensor systems, and this information will flow in compressed format into the cloud. The fleet data will be used for next-generation intelligent mapping. VW aims to form an industry-wide standard with other automakers, who will join in collecting data in the future.

VW Group's workforce reduction and investments in future-oriented areas

In November 2016, VW Group agreed with the General Works Council to reduce 23,000 jobs in Germany by 2025 via natural fluctuation and early retirement. Thanks to the savings that this plan will provide, the Group expects a positive annual impact on earnings of about EUR 3.7 billion from 2020 onward. Meanwhile, the Group plans to make an investment of EUR 3.5 billion in the areas of e-mobility and digitalization. This will result in the creation of 9,000 jobs.


New model launch plan: expanding and updating SUV offerings

VW
Arteon
The new Arteon midsize sedan (Geneva Motor Show 2017)

  In its new model launch plan, the VW brand continues to expand and update its SUV lineup. In 2017, it will introduce the Tiguan long-wheelbase model, Golf-based T-Roc compact SUV, and new Touareg flagship SUV that will be redesigned for the first time in seven years. The Arteon upper-segment fastback and the new Polo, which is to be updated for the first time in eight years, will also be released.

  The Audi brand plans to launch the new A8 flagship sedan in 2017. The brand will release the Q8 flagship SUV in 2018 followed by the Q4 compact CUV in 2019.

The VW Group's new model launch plan

VW brand

Arteon A coupe-style five-seater fastback with a large rear hatch. The Arteon debuted at the Geneva Motor Show in March 2017. The model, which is positioned above the Passat, will be sold in Germany from June 2017. It is based on the MQB platform and offers a selection of six types of four-cylinder turbo engines (three types each for gasoline and diesel engines). The Arteon is being produced at the Emden Plant in Germany.
Tiguan Allspace A seven-seater version of the Tiguan compact SUV. Its wheelbase is 11 cm longer than the regular Tiguan. VW will launch the SUV in China, North America, and Europe in 2017. The extended version of the Tiguan is called the Tiguan Allspace in Europe. It is simply dubbed the Tiguan in North America and China.
New Polo A compact car to be updated for the first time in eight years. VW is planning to produce the model starting in June 2017. Based on the MQB A0 platform, it is longer and wider than the current model.
T-Roc A compact crossover SUV based on the new GOLF. The model is underpinned by the MQB platform. VW is planning to launch the T-Roc from the latter half of 2017.
New Touareg VW's flagship SUV, which will be redesigned for the first time in seven years. Production of the model is scheduled to start in November 2017. It will adopt VW's MLB platform that is also used in the new Audi Q7.

Audi Brand

New A8 Audi's flagship sedan. The vehicle will be unveiled in July 2017. The new A8 will be equipped with Traffic Jam Pilot, which adopts level 3 autonomous driving technology. The system will give drivers the option to travel hands-free at speeds of up to 35 mph when the vehicle is on a limited-access, divided highway.
Q8 A coupe style, top-grade SUV. Audi exhibited the Q8 concept at the Detroit Auto Show in January 2017 and the Q8 Sport concept at the Geneva Motor Show in March of the same year. Production of the Q8 is scheduled to start at the Slovakian Bratislava Plant in 2018.
Q4 The Audi brand's first compact utility vehicle (CUV). The Q4 will be produced at the Gyor Plant in Hungary starting in 2019. This coupe-style CUV is positioned between the Audi Q3 and Q5.


Electrification plans: adoption of MEB platform planned for 2020

VW
I.D. Buzz electric microbus
The VW I.D. Buzz electric microbus (Geneva Motor Show 2017)

  According to its "Together - Strategy 2025" plan, the VW Group intends to launch 10 electrified models by the end of 2018. These models include current and refreshed EVs and PHVs such as the e-Golf and Golf GTE. During the period from 2018 to 2019, Audi and Porsche will introduce their first full EVs in the form of the Audi e-tron and Porsche Mission E.

  The Group plans to adopt the Modular Electric Drive Kit (MEB) platforms developed for EVs starting in 2020. The Group will launch 30 different types of battery-powered EVs based on MEB platforms by 2025. These EVs range will feature a wide range of styles (compact cars, sedans, crossovers, SUVs, and minivans) and a variety of sizes. All VW Group brands will join in releasing EVs. The Group has a target for 2025 to sell two to three million EVs per year.

Electrified model launch plan

VW brand: sales of one million EVs planned for 2025

Refreshed e-Golf An EV version of the Golf. Production of the refreshed model started in April 2017. The new e-Golf uses a lithium-ion battery where the capacity has been increased from 24.2 kWh to 35.8 kWh. Its driving range in the NEDC cycles has been extended from 190 km to 300 km. The electric motor delivers 100 kW, 15 kW more than in the previous model. The new e-Golf is being produced at VW's plant in Wolfsburg as well as at the Transparent Factory in Dresden, Germany.
I.D. A compact hatchback that will be the first model of VW's new EV series. VW exhibited the I.D. concept at the Paris Motor Show in September 2016. It will be the first model based on the MEB platform. It is driven by an electric motor with an output of 125 kW and has a range of 400 to 600 km. Production of the model is scheduled to start in 2020. It will be offered with a fully autonomous mode after 2025 onward.
I.D. Buzz A version of the I.D. family that is an electrically powered microbus. The I.D. Buzz concept was presented at the Detroit Auto Show in January 2017. Based on the MEB platform, it uses a driving system with an output of 275 kW and has a range of 600 km. VW plans to start production of the model in 2020. A fully autonomous mode will be offered in the future.
I.D. Crozz An electrically powered crossover utility vehicle (CUV). The I.D. Crozz concept was exhibited at the Auto Shanghai in April 2017. Underpinned by the MEB platform, it uses an all-wheel drive system with an output of 225 kW and has a top speed of 180 km/h. It can cover up to 500 km on one battery charge. Production of the I.D. Crozz is scheduled to start in 2020. It will be offered with a fully autonomous mode in the future.

Audi brand: one third of total production to be electrified vehicles in 2025

Audi e-tron The Audi brand's first all-electric-drive production model. This electric SUV will appear on the market in 2018. It will be positioned between the Audi Q5 and Q7. The series production model will be based on the Audi e-tron quattro concept exhibited at the Frankfurt Motor Show in 2015 (The word "quattro" was dropped from the model name.) It provides output of 320 kW, range of 500 km, and accelerates from a standstill to 100 km/h in 4.6 seconds.
Audi e-tron Sportback concept A four-door, coupe style Gran Turismo EV. The concept was presented at Auto Shanghai in 2017. This series production model is scheduled to be on the market in 2019. It offers output of 320 kW, range of 500 km, and sprints from a standstill to 100 km/h in 4.5 seconds.
h-tron A fuel cell vehicle. Audi plans to introduce a series production model of the h-tron in 2025.

Porsche brand: electric sports car to be launched in 2019

Mission E A four-seater electric sports car scheduled to be launched in 2019. The concept was exhibited at the Frankfurt Motor Show in 2015. It has a range of 500 km and accelerates from a standstill to 100 km/h in only 3.5 seconds. It is expected to compete with the Tesla Model S.


China: VW expands SUV lineup with Tiguan long-wheelbase model and Teramont

PHV
version of China-only VW Phideon
The PHV version of China-only VW Phideon

  In China, the largest market for the VW Group, its passenger car sales (on a factory shipment basis, excluding imports) increased by 12.1% year-over-year (y/y) to 3.78 million units in 2016. However, the Group's sales declined by 2.1% y/y to 1.25 million units for the period January-April 2017. While the VW brand's sales decreased by only 0.4%, the Audi brand experienced an 11.6% fall. Audi had a plan to form a new partnership with SAIC Motor for the production and distribution of the Audi vehicles in China. The existing Audi dealer network, which is affiliated with the FAW Group, opposed this new partnership and refused deliveries of the Audi vehicles for a certain period. VW Group explained that these moves resulted in the brand's sales drop. It is reported that Audi will put off partnering with SAIC Motor until 2020.

  Looking at China's automotive market by vehicle type, sedans and hatchbacks accounted for 49.8% in 2016, down from 69.3% in 2012. At the same time, the ratio for SUVs increased from 12.9% to 37.1%. However, for the VW Group, which offers a small SUV lineup, SUVs accounted for only 12.6% of sales while sedans and hatchbacks made up 86.2% in 2016. In order to enhance its product lineup, the Group is launching a number of SUVs in China in 2017: the long version of the VW Tiguan compact SUV, VW Teramont large SUV, Audi Q5 midsize SUV, and Skoda 's first large SUV, the Kodiaq.

  In China, where emissions regulations have been tightened, OEMs operating in the country are required to reduce corporate average fuel economy to 5L/100km by 2020 (down from 6.7L/100km in 2016). In addition, the Chinese government plans to introduce a carbon trading scheme in the summer of 2017, and to require OEMs to produce NEVs (EV, PHV, and fuel cell vehicles) locally starting in 2018. (The government is now considering postponement of this plan for one year as of June 2017.) China aims to increase the industry-wide sales of NEVs from 310,000 units in 2016 to two million in 2020, and further to seven million in 2025. The VW Group has plans to sell two to three million EVs globally annually by 2025, and two-thirds of these EVs will be sold in China. In May 2017, the Group announced plans to establish a joint venture with JAC, its third partner in China, and to build low-priced EVs in the country. Moreover, Audi has been cooperating with China's leading IT service companies including Alibaba, Baidu, and Tencent to build a system for supporting future connected cars. The VW Group will set up a joint venture with Mobvoi to develop AI technologies for vehicles.

China's passenger car
sales by type VW Group passenger car
sales by type in China

VW Group: new model launch plan in China (2017)

SUVs

VW Tiguan L A long-wheelbase model of the Tiguan compact SUV that was launched in January 2017. The SUV comes with a 1.8- or 2.0-liter turbo engine mated with a seven-speed DSG. It is being produced at SAIC-VW's Anting Plant in Shanghai.
VW Teramont An all-new large SUV released in March 2017. This SUV is sold as the VW Atlas in the U.S. It arrives with a choice of six- or seven-seater configurations. It is driven by a 2.0-liter turbo engine with low or high torque or a 2.5-liter V6 turbo engine. The Teramont is being built at SAIC-VW's Ningbo Plant in Zhejiang province.
New Audi Q5 A midsize SUV to be launched in 2017. The SUV is powered by a 2.0-liter four-cylinder turbo engine. It comes with an all-wheel-drive system as standard equipment. It is produced at FAW-VW's Changchun Plant. The version equipped with a 3.0-liter V6 turbo engine will be imported.
Skoda Kodiaq Skoda's first large SUV, which was launched in April 2017. The SUV offers a choice of five- or seven-seater configurations. It comes with a 1.8- or 2.0-liter TSI engine combined with a seven-speed DSG. It is being built at SAIC-VW's plant. Skoda plans to expand its SUV lineup by launching a number of SUVs over next several years.

Other body types

VW Phideon (PHV) A PHV version of the VW flagship sedan Phideon that is sold in China only. The variant is scheduled to be launched in August 2017. A production model was exhibited at the Auto Shanghai in 2017. It is powered by a 2.0-liter four-cylinder direct injection turbo gasoline engine combined with an electric motor. The plug-in-hybrid system provides 180 kW. The model has an all-electric range of 50 km and an overall range of 850 km.
New VW Lavida A China-only compact sedan. A redesigned model will be introduced in 2017.

VW Group partners JAC to produce EVs

In June 2017, VW Group and China's Anhui Jianghuai Automobile (JAC) signed a memorandum of understanding to jointly develop and produce NEVs. The total investment will amount to CNY 6 billion. The two companies will establish a 50:50 joint venture to assemble low-priced EVs under a new brand starting in 2018. The joint venture will set up facilities with an annual production capacity of up to 360,000 units. VW Group already formed partnerships with SAIC Motor and the FAW Group. The Chinese government approved the automaker's tie-up with the third partner, which is an exceptional case.


Electrification plans in China

VW Group VW Group will sell two to three million EVs per year globally by 2025, two-thirds of which will be sold in China
VW brand Of the Group's sales mentioned above, the VW brand will sell a million EVs per year globally, 600,000 of which will be produced and sold in China.
Audi brand * Audi plans to produce five e-tron models in China, including EVs with ranges well in excess of 500 km, by 2021. (The first model was the A6L e-tron PHV released in November 2016.)
* Audi will also produce at least one electrically powered SUV and sedan model in all volume segments (six segments) locally by 2025.

Audi partners Alibaba, Baidu and Tencent from China

In September 2016, Audi China, and FAW-VW signed a memorandum of understanding on a partnership with Alibaba, Baidu, and Tencent. The partners will deepen their cooperation in the areas of data analysis, internet-vehicle platform building and urban intelligent transport. In cooperation with Alibaba, Audi will integrate real-time traffic data into Audi MMI and offer high-resolution 3D maps. Starting from 2017, Audi will launch Baidu's systems in its local model lineup for the seamless transfer of Baidu's app services between the customers' smartphones and their vehicles. With Tencent, Audi will integrate features including positioning and music sharing into its new models.

VW Group establishes a joint venture with Mobvoi to develop AI technologies in vehicles

VW Group China and Mobvoi, a leading Chinese AI company, have entered a strategic partnership to establish a 50:50 joint venture and develop and apply AI technologies for automotive purposes. VW committed to an overall investment of USD 180 million. Utilizing Mobvoi's voice recognition and natural language processing technologies, the new joint venture will explore and provide answers for the future smart mobility.


USA: VW Atlas and Audi A5/S5 to launch; production of EVs to start in 2021

VW
Atlas R-Line
The new VW Atlas R-Line midsize SUV
VW
Group light vehicle sales in the US

  In the U.S. market, the VW Group's light vehicle sales decreased by 2.6% y/y to 591,000 units in 2016. The VW brand's sales fell 7.6% while the Audi brand's sales rose 4.0%. Although the overall market expanded by 0.5% in the U.S., the VW Group's sales declined due to its emissions scandal, and its market share shrank from 3.5% to 3.4%. Among the models marketed by the Group, sales of the VW Tiguan, Audi A4, Q3, and Q7 increased. The Group's sales for the period January-April 2017 recovered, recording a 7.5% y/y increase at 187,000 units. Both the VW and Audi brands saw y/y growth of 7.9% and 7.7%, respectively.

  Regarding sales by vehicle type in the U.S., the ratio of light trucks including SUVs has been expanding recently owing to low fuel prices. In 2016, light trucks accounted for 59.7% of the U.S. light vehicle market. Meanwhile, light trucks under the VW brand, which has only the Tiguan and Touareg SUVs in the segment, made up 14.8% of its total sales. In its business strategy, the VW brand aims to regain competitiveness in the U.S. by expanding its lineup in the country's core segments, namely SUVs and sedans. The brand is launching the Atlas and Tiguan (long-wheelbase model) SUVs as well as the new Jetta sedan in 2017. Assuming that electrification is required in the U.S. market, the VW brand plans to produce EVs based on the MEB platform locally by 2021.

  Audi's sales have been increasing steadily in the U.S. and the brand enjoyed its sixth consecutive year of sales growth. However, in 2016, while sales of light trucks rose 17.7%, sales of passenger cars fell 6.4%. For the period January-April 2017, sales of passenger cars also declined 2.6%. Audi intends to expand its share in the premium car market by releasing the A5/S5 midsize coupe/convertible and the Q5/SQ5 midsize SUV in 2017. As for electrification, Audi will launch three battery-powered EV models by 2020.

  Audi has opened a new plant in Mexico, its first plant on the North American continent, in September 2016. The company started operations at this plant with production of the new Q5.

VW Group: new model launch plan in the U.S.

VW brand

Atlas A seven-seater midsize SUV launched in May 2017. This SUV is based on the MQB platform and is larger than any other VW model on sale in the U.S. It comes with a 2.0-liter TSI turbo or 3.6-liter V6 engine. With either engine, power is sent through an eight-speed automatic transmission. The all-wheel-drive system can be selected for the V6 models. VW invested USD 900 million in its Chattanooga Plant in Tennessee to manufacture the Atlas. The model will be on the market in Russia and the Middle East from the end of 2017.
Tiguan
(long-wheelbase model)
A long-wheelbase variant of the Tiguan compact SUV to be launched in the summer of 2017. The model is underpinned by the MQB platform. The long wheelbase, which is 11 cm longer than the new Tiguan sold in Europe, provides both sliding second-row seats and an optional third row. It will be built at the Puebla Plant in Mexico.
New Jetta A compact sedan to be introduced by the end of 2017.

Audi brand

A5/S5 A midsize coupe/convertible based on the A4/S4. The A5/S5 was launched in the spring of 2017. An A5/S5 Sportback coupe with a hatchback-style tailgate was added. The model comes with an all-wheel-drive system as standard. The A5 uses a 2.0-liter four-cylinder turbo engine, while the S5 adopts a 3.0-liter V6 turbo engine.
New Q5/SQ5 A five-seater midsize crossover SUV launched in the spring of 2017. The model is being produced at the San Jose Chiapa Plant in Mexico, which began operations in September 2016. The Q5 is powered by a 2.0-liter four-cylinder turbo engine while the SQ5 equips a 3.0-liter turbo engine.

Audi opens its first plant in North America

In September 2016, Audi opened its first plant on the North American continent. It is located in San Jose Chiapa in Mexico's federal state of Puebla. With an investment of more than EUR 1 billion, Audi established facilities that have an annual production capacity of 150,000 units. The brand started production of the new Q5 SUV. There is a press shop, body shop, painting shop and assembly line onsite at the plant. Seven suppliers started operations in the supplier park adjacent to the plant. At the start of production, Audi is sourcing more than 70% of the parts from the NAFTA region and plans to increase this proportion of localization over the long term.

VW builds new Tiguan (long-wheelbase model) in Mexico

VW has been building the new Tiguan SUV (long-wheelbase model) at its Puebla Plant in Mexico since the beginning of 2017. The automaker invested USD 1 billion in the plant and hired 1,900 people to produce the SUVs. The Tiguans assembled at the Puebla plant will be sold not only in Mexico but also in North and South America.

------------------
Key words

VW, Audi, EV, SUV, China, USA, Mexico, Electrification, Mobility

<Automotive Industry Portal MarkLines>