VW CEO targets billions in mobility revenue by 2025

At the 2017 annual Volkswagen (VW) Group press conference, the company laid out its goals for 2025: to keep its place among the world's largest automakers and become the largest provider of e-mobility.

IHS Markit Perspective:

  • Significance: At the 2017 annual Volkswagen (VW) Group press conference, the company laid out its goals for 2025: to keep its place among the world's largest automakers and become the largest provider of e-mobility.
  • Implications: At the 2017 annual Volkswagen (VW) Group press conference, the company laid out its goals for 2025: to keep its place among the world's largest automakers and become the largest provider of e-mobility.
  • Outlook:After a transition year in 2016, VW has largely emerged from the diesel crisis with a strong, focused forward plan. At the 2017 annual press conference, VW Group CEO Matthais Müller spoke on the future beyond the diesel issue. VW has laid out a fundamental goal to redefine mobility and aims to become the leading e-mobility provider in 2025, while remaining its place among the world's largest automakers.

Volkswagen (VW) AG CEO Matthias Müller led the group's annual media press conference in Wolfsburg, Germany, on 14 March 2016, with IHS Markit among the media and analysts present. In addition to sharing the group's financial performance in 2016, the event provided an update on the company's efforts to reach its Together Strategy 2025 goals. As the diesel scandal is now demanding less time and fewer capacities, the company is focusing more on the future. VW's new "1 +4" goals supersede but retain essential elements of the five-point plan it developed to get through the worst of the diesel crisis. The 1+ refers to ongoing work on the diesel issue.

Focused on supporting the Together 2025 strategy, the new initiatives are aimed at achieving an operating return on sales between 7% and 8% and a return on investment (ROI) of more than 15%, while reducing the ratio of capex and R&D ratios of spending in 2025. In 2016, return on sales was 6.9% and ROI 8.2%. VW also aims to remain among the world's largest automakers while becoming the leading provider of e-mobility and a role model for environmental concern, safety, and integrity.

The Together Strategy 2025 was introduced in mid-2016 to replace Strategy 2018. To support the plan, VW has defined a new code of group values. The company had been working on Strategy 2025 before the diesel emissions situation erupted in September 2015. But VW's leadership seems to have leveraged the diesel crisis to change corporate culture, much as General Motors (GM) CEO Mary Barra was able to after GM's ignition switch crisis. Müller announced VW's intention to develop the code at the 2016 conference and reported achieving this in 2017.

The Together 2025 strategy involves four initiatives. The first addresses the changes under way in the industry, as VW is transforming its core automotive business to include the advances on the verge of changing the sector. The second is for VW to build its mobility solutions business into a pillar of the future for the group. Third, VW is strengthening its innovation power, needed to deliver the first two initiatives. The fourth strand involves securing the investment the company will need to support the other three elements.

Transforming the core business

VW instituted in 2016 a new model line organisation designed to improve the business operation, shorten decision-making paths, allocate responsibility more clearly, and achieve a more results-driven focus. Müller pointed to partnerships established in 2016 and early 2017 to support this. These include a technical partnership with Tata for developing budget cars for India, VW's alliance with US truck maker Navistar, a joint project with NVIDIA to develop a cockpit based on artificial intelligence, and ItalDesign's joint project with Airbus.

Müller pointed to VW's announcement of plans for self-driving cars in the VW ID line as well as the Sedric concept presented at Geneva. "Sedric is the embodiment of our objective to continue implementing the steps needed to bring self-driving cars to series production for our customers," he said. Much of the work on the 2017 Sedric concept was performed by the Europe Future Center, announced at Geneva 2016.

Finally, VW has established its own company for developing a self-driving system for the wider group. Autonomous Intelligent Driving GMbH is located and operated within the Audi division and headquartered in Munich. In battery development, VW plans to be a technology leader in solid-state battery technology by 2025. A centre of excellence led by the VW brand for battery development will operate from the second quarter of 2017, with responsibility for development, procurement, and quality assurance of all group battery cells and models.

The centre is expected to begin a laboratory line in 2018. Müller said that he expects VW to have a pilot line by 2020. Müller described negotiations on partnerships in battery cells as being at an "advanced stage" and set to conclude in 2017. VW's interest in battery cell development reflects how batteries will become the heart of vehicles, as engines are today. Earlier reports have suggested VW's interest in the field. VW currently sources lithium-ion battery cells from Samsung and Panasonic. Müller reiterated VW's commitment to launching more than 10 EV models by the end of 2018 and more than 30 new BEVs by 2025. He said that VW's self-driving system should be ready for series production in 2021, including a vehicle without a steering wheel or pedals.

MOIA to generate billions in annual revenue

While mobility services are in their infancy for VW, Müller forecast substantial future revenues from the field. "We believe that we as a group will be able to generate billions in earnings in the mobility services business in the long term," he said. Moving toward VW's goal of expanding mobility solutions includes establishing the MOIA unit. "The main job of MOIA is to develop and market our own mobility services," said Müller. MOIA is getting under way, leveraging VW's stake in ride-hailing app Gett. Targets include market leadership in ride-hailing services in Europe, with shuttle and pooling services in more than 20 cities by 2021. VW plans to deploy autonomous minibuses and to operate one of the world's largest driverless vehicle fleets by 2025. VW will develop a comprehensive portfolio of smart mobility services at the group brands as well as combining mobility and transport services into an integrated product offering. MOIA will focus on Europe in 2017, with North America and Asia expansion as a second step.

Müller said that MOIA and Gett would work to get Gett into Israel, Russia, the United Kingdom, and the United States and to expand services in France, Germany, Italy, and Spain. Earlier reports have indicated that VW plans to offer various automotive solutions to Gett. Areas of exploration include ways to pool vehicle costs as well as access to certain cars. GM has targeted similar areas through its mobility services company Maven and its stake in ride-hailing company Lyft.

MOIA is working to develop partnerships with cities including Hamburg to identify mobility needs. VW is developing an on-demand shuttle-bus system under MOIA for pooling rides. In combining the features of regular city bus lines and shared taxi services this resembles Ford's Chariot shuttles. GM's Maven unit, by contrast, has focused initially on single-rider and car-sharing opportunities. Indicated by the Sedric concept and confirmed by MOIA, VW is developing a dedicated vehicle to support this service. MOIA aims for early deployment of its ride-pooling programme within two years. MOIA said its business premise recognised the need for collaboration with cities prior to deployment, to ensure systems are tailored to meet their needs. Mobility solutions held back by their inadequate collaboration with cities include BMW's DriveNow car-sharing service, which had to pull out of San Francisco, California, after failing to reach an agreement with the city on parking for the shared cars.

Müller also highlighted VW Truck & Bus's development of a cloud-based operating system for the commercial-vehicle sector. The company is also working with DiDi and GoFun in China on mobility service collaborations. He said VW needs to become more entrepreneurial, a trait the company is already displaying in mobility solutions. Both MOIA and Mueller told IHS Markit that they understood that not all mobility service projects would be successful. Müller said the shift in attitude had already brought "great momentum" throughout the company.

Outlook and implications

After a transition year in 2016, VW has largely emerged from the diesel scandal with a strong, focused forward plan. At the 2017 annual press conference, VW Group CEO Matthais Müller was able to spend more time discussing the future beyond the diesel crisis. VW has laid out a fundamental goal to redefine mobility and targets being the leading e-mobility provider in 2025, without losing any ground as one of the world's largest automakers.

As we noted last year, VW's vision of future mobility differs little from that presented by its rivals. Several competitors have established mobility companies and are involved in many very similar projects. MOIA was established in December 2016 so necessarily remains at a very early stage.

But VW's relatively fast progress over 2016 is evidenced by introductions at the Paris and Geneva shows of concepts for autonomous, electric vehicles that could be suited for ride-hailing or pooled rides. As VW is based in Europe, with its largest markets in Europe and China, its early efforts at mobility are focused outside North America. Backing Gett brings VW access to one of the largest ride-hailing services in the world. While Gett is unavailable in the United States, it is strong in many markets where VW is also strong.

VW targets becoming "one of the global top three providers of efficient, convenient, and sustainable mobility solutions by 2025", said Mülller. VW's extremely broad range of brands and vehicles - in light-, heavy-, and medium-duty vehicle classes - gives it the scale to achieve this goal, assuming the global market for mobility services develops as projected.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.


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