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VW restructure focuses on sustainable mobility

Power play: Volkswagen Group is planning on releasing more than 30 new electric vehicles which it says will account for almost a quarter of total sales by 2025.

Together – Strategy 2025 to produce over 30 new electric vehicles over next 10 years

17 Jun 2016

VOLKSWAGEN Group has revealed its plans for the next decade, doubling down on electric-vehicle technologies, expanding new mobility solutions, increasing global operational efficiency and restructuring a number of its component businesses following last year's diesel emissions cheating scandal.

The plan, dubbed Together – Strategy 2025, will be the biggest change in the German car-making giant’s 79-year history and will ripple through all its subsidiaries including Audi, Lamborghini, Skoda and light-commercial vehicle brands MAN and Scania.

After it was revealed that Volkswagen intentionally cheated emissions tests, the company has been working hard to reverse public perception of being dirty – both environmentally and corporately – and Volkswagen CEO Matthias Mueller said the restructure was to ensure Volkswagen’s relevancy to both consumers and stakeholders in an ever-changing environment.

“Our future program ‘Together – Strategy 2025’ will make the Volkswagen Group more focused, efficient, innovative, customer-driven and sustainable – and systematically geared to generating profitable growth,” he said.

“We aim to create lasting value for all our stakeholders. This can only be achieved together – with our employees, with and for our customers, shareholders and business partners – while being fully aware of our responsibility toward society and the environment.” Mr Mueller specifically cited the emissions scandal as a low point for the company and said the new plan would work to regain public trust.

“This will require us – following the serious setback as a result of the diesel issue – to learn from mistakes made, rectify shortcomings and establish a corporate culture that is open, value-driven and rooted in integrity,” he said.

“Volkswagen has always enriched the lives of millions of people all over the world with its brands and products. Our aspiration is to continue that success story and play a leading role in shaping auto-mobility for future generations, too.

The company plans to release more than 30 new battery electric vehicles (BEVs) over the next decade, which, according to Volkswagen Group, “will be between two and three million units in 2025, equivalent to some 20 to 25 per cent of the total unit sales”.

Last year, the electric vehicle (EV) market, which under VFACTS classification includes plug-in hybrid electric vehicles, only accounted for 0.1 per cent of all new vehicle sales in Australia and the 1108 total actually represented a 2.4 per cent decrease on the 1135 EVs sold in 2014.

New full EVs rumoured from Volkswagen Group include the Tesla Model S-fighting Porsche Mission E, Volkswagen’s next-generation Phaeton luxury sedan and an electrified Audi e-tron quattro all-roader.

As reported earlier, Volkswagen will also focus on key models with in fast-growing market segments, culling unnecessary variants and ageing platforms in a bid to strengthen its range and increase profitability.

According to the German car-maker, it will “reduce complexity in development and production, increase efficiency and thus make better use of the system’s economic merits”.

Specifically, Volkswagen Group is looking to cap its capital expenditure (money invested into upgrading or fixing existing equipment and facilities) to six per cent of sales revenue in the next 10 years. Research and development (R&D) has also been set the same target of six per cent of sales and selling, general and administrative expenses will be reduced to under 12 per cent.

Volkswagen chief financial officer Frank Witter said the streamlining of car-making procedures, along with operational costs, will ensure profitability for investors in the years to come.

“In line with being systematically geared to generating profitable growth, the focus is clearly on earnings power,” he said. “Over the coming years, we will do all we can to continuously create value for our shareholders based on a solid financial position.” Another key aspect of VW’s future business strategy is expanding new mobility solutions, including autonomous vehicles, ride sharing and transport on-demand.

According to Volkswagen, it “intends to independently provide the resources necessary to address the future topic of autonomous driving and artificial intelligence,” with an aim to “licence a competitive self-driving system (SDS) developed in-house by the end of the decade”.

Audi has already developed a functioning driverless technology prototype, installed in its A7 model, which is being produced to behave more 'human-like' on roads.

Last month, Volkswagen bought a $US300 million ($A451.3m) stake in Israeli-based start-up ride-sharing company Gett, a competitor to Uber, and is looking at participating heavily in “partnerships, acquisitions and venture capital investments” to expand its new mobility solutions pie.

Another aspect Volkswagen Group is seeking to improve is its light-commercial vehicle divisions, with the Together – Strategy 2025 outlining the desire to “to become the most profitable company in the sector, with a significant presence in all key regions of the globe”.

What this means, according to Volkswagen, is that “in the medium term, the business unit will increasingly evolve from a purely commercial vehicles manufacturer into a provider of intelligent transformational solutions”.

The new plan also aims to wring more profitability from its Financial Services Division, whose responsibilities include financing (for both consumers and dealers), insurance, banking and leasing.

Mr Mueller said the Together – Strategy 2025 would not be possible unless it effected all components of the Volkswagen Group and added that it was necessary to remain the juggernaut it is today.

“Developing, building and selling vehicles, including the related financial services, will remain essential for the Volkswagen Group going forward,” he said. “However, the transformation we have initiated today will permanently change the face of our core business, ensuring that we remain a leading player over both the medium and long term.

“As is traditional in the Volkswagen Group, we will take a responsible, collaborative approach. Such far-reaching change as we have set out to achieve is only possible together.” Mr Mueller added that the Volkswagen of tomorrow will have something both customers and investors can look forward to.

“The Volkswagen of the future will inspire its customers with fascinating vehicles, financial services tailored to demand, and smart mobility solutions,” he said.

“We will be a technology leader and role model when it comes to environment, safety and integrity. The Group will achieve competitive profitability, and so remain both an attractive investment and an excellent, reliable and secure employment.

“In short, Volkswagen will be an enterprise we can all be proud of.”

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