Volkswagen is in such hot water with our country’s environmental regulators that it has had to overhaul the entire company, all across the world. The diesel emissions scandal, which may cost the company $10 billion in fines and buybacks alone, is the impetus behind a new nine-year strategy meant to appease government regulators and make up for all the money it’s about to lose.
The crux of the plan, dubbed “TOGETHER—Strategy 2025,” is electric vehicles. Lots of them. By 2025, Volkswagen will be selling 30 battery electric vehicles across its 12 divisions. The focus will be on electric passenger cars, which Volkswagen believes will comprise between 20 and 25 percent of its entire worldwide car sales.
Remember VW’s previous goal of achieving 10 million sales by 2018? It reached that number in 2014, and dipped slightly in 2015 to 9.93 million vehicles. The 2025 target is now a range from 10 million to 12 million. By Volkswagen’s count, EVs—not plug-in hybrids or hybrids, but pure EVs—will reach at least two million annual sales in just nine years.
To finance that plan, in the face of the cash bleed from the diesel-emissions scandal, there will be cuts elsewhere. Over the coming months, each of the company divisions will release it own strategy detailing exact budget and model cuts. You can bet, however, that the current 340 model variants will shrink. The parts business may be spun off, as General Motors did with Delphi. And lots of people probably will be laid off. Partnerships with other automakers in developing markets, particularly Asia, will drive down manufacturing costs. Volkswagen also wants to license its battery business, once it develops “battery technology as a new competency.” By 2020, it also hopes to license autonomous-driving and artificial-intelligence systems to other automakers and companies.
Since automakers have a particularly envy of Silicon Valley tech startups, they increasingly like to reject that they’re in the car business. Now Volkswagen is too. From now on, Volkswagen is no longer a car company. It is a “world-leading provider of sustainable mobility.” That means Volkswagen will be investing and buying up other companies that support ride sharing, autonomous taxis, and anything else that doesn’t involve a traditional point of sale. Volkswagen estimates it will be making “billions” off these ventures by 2025—never mind that no other company involved in those ventures is today making a profit.
The most important line item for investors is the company’s gross operating margin on sales, which currently stands at six percent for 2015. Volkswagen wants that to be seven to eight percent by 2025. For cars alone, it wants a margin of more than 15 percent. Research and development, along with staffing expenses, will be significantly reduced so that they’re more in line with actual sales. Even so, that’s a big challenge for a car company—or even for a world-leading provider of sustainable mobility.
from Car and Driver Blog http://ift.tt/28LAaJo
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