VW bets on new technology to bounce back from crisis Plan to be electric cars leader by 2025
FRANKFURT: Volkswagen hopes to bounce back from its crisis with a shift in focus to more battery-powered cars, digital technologies such as autonomous vehicles, and an increase in sales of SUVs in the US.
Herbert Diess, the head of the Volkswagen core brand, said yesterday at a news conference that the goal of the Transform 2025 plan was “to fundamentally change Volkswagen” as it recovers from its scandal in which it rigged diesel cars to cheat on emissions tests.
The plan foresees new investments in electriccar technology and in software that would enable new ways of using and sharing cars. Diess said at group headquarters in Wolfsburg, Germany, that the company expects to sell a million electric vehicles a year by 2025.
The company would also “massively step up” its capacity to develop software, aiming to create industry-leading software and hardware systems for digitally connected and autonomous cars by 2025.
Another element of the plan is increasing sales in the US by introducing products that are more appropriate for the market, such as more SUVs and larger cars. The plan for the Volkswagen brand follows Friday’s announcement that the division would eliminate 23,000 jobs in more traditional areas in Germany and create 9,000 new ones focused on new technologies.
Diess said the company aims to raise profit margins on sales to 6 percent by 2025, from just 2 percent in 2015. Profitability at the Volkswagen brand has lagged due to its higher cost base, the result of a strong role for employee representatives. They have half the board seats, and are generally supported by the government of Lower Saxony, which holds a stake in the company. Partly as a result, Volkswagen Group makes most of its profits from its luxury brands Audi and Porsche.
The company struck a deal with its workforce, which agreed to the job reductions through voluntary means such as early retirement over a period of years. In return, employees won a commitment to locate new technology development and manufacturing in Germany.
Volkswagen has agreed to pay $15 billion under a settlement with US authorities and car owners over cars equipped with software that turned off emissions controls under normal driving conditions. The scandal has served as a spur for the company to shake up its management culture and address longstanding issues such as the cost question in Germany.
Volkswagen aims to be the world leader in electric cars by 2025, Diess said. “By 2025 we plan to sell one million electric cars per year, and by then we also want to be the global market leader in electromobility,” Diess said at a presentation of the brand’s future plans. “Going forward our electric cars will be the hallmark of Volkswagen,” he added.
The shake-up at Volkswagen’s core brand comes as the group tries to recover from the biggest crisis in its history after it admitted last year to installing emissions cheating software in some 11 million diesel vehicles worldwide.
The so-called defeat devices could detect when a vehicle was undergoing regulatory tests and lowered emissions accordingly to make the cars seem less polluting than they were.
The crisis hurt sales and damaged the image of the proud German company, pushing it to its first loss in over two decades last year. Even before dieselgate, the VW brand had been struggling with profitability, weighed down by high costs and low productivity.