Volkswagen to Speed Up the Development of EVs & Digital Services as Part of its Updated 'ACCELERATE' Strategy

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【Summary】Automaker Volkswagen announced an updated company strategy called "ACCELERATE" that includes a faster roll out new electric models that are software-based and connected. The updated ACCELERATE strategy will prepare the automaker for a changing auto industry that’s quickly moving towards electrification, connectivity and autonomous driving.

Eric Walz    Apr 11, 2021 12:35 PM PT
Volkswagen to Speed Up the Development of EVs & Digital Services as Part of its Updated 'ACCELERATE' Strategy

German automaker Volkswagen has already made its bold electric vehicle plans known. The company is investing billions to develop new electric models globally, but now its accelerating those plans under an updated strategy that includes a faster roll out new electric models that are software-based and connected.

The automaker originally planned for 35% of its European models to be battery-powered by 2030, but now its doubled its target to 70% of its model lineup. In the U.S. and China, Volkswagen plans for 50% of its vehicles to be fully-electric by 2030.

Volkswagen's new timelines are part of the company's updated "ACCELERATE" Strategy, which will prepare the automaker for a changing auto industry that's quickly moving towards electrification, connectivity and autonomous driving.

Over the next several years VW will introduce one new electric model every year, beginning with the new all-wheel-drive ID.4 GTX in the first half of 2021. The automaker will follow that up with the sporty ID.5 in the second half of 2021. 

In the third quarter of 2021, Volkswagen will launch the ID.6 X / CROZZ, a seven-passenger electric SUV for the China market.

Volkwagen's ID family of vehicles currently includes the all-new ID.3 hatchback and ID.4 SUV. Both vehicles are positioned to compete with Tesla's Model 3 sedan and Model Y crossover, as well as other vehicles in the rapidly expanding EV market.

Volkswagen is also planning to launch a more affordable electric car under the ID.3 and the vehicle will arrive two years ahead of its previously scheduled launch in 2027 to 2025.

In the interim, Volkswagen's existing internal combustion engine models like the Golf, Tiguan and Passat, will also be updated to more efficient hybrid powertrains in parallel to the development of new EVs.

"We will still need combustion engines for a while, but they should be as efficient as possible, which is why the next generation of our core products – all of which are world models – will also be fitted with the latest generation of plug-in hybrid technology, with an electric range of up to 100 kilometers," said Volkswagen CEO Ralf Brandstätter.

The new EVs will be built on Volkswagen's Modular Electric Drive Toolkit (MEB), which the company says has been improved to offer quicker acceleration, longer range and faster charging.

The new MEB platform represents an entirely new way of building cars at Volkswagen. The new architecture consolidates all of the vehicle's electronic controls and reduces the number of microprocessors. Volkwagen said previously that it aims to build up to 10 million vehicles on its new MEB platform, but there is more to the company's updated strategy.

"E-mobility was just the beginning: the real disruption has yet to come. With our strategy we will ACCELERATE towards the digital future," said Brandstätter. "In the coming years, we will change Volkswagen as never before."


Volkswagen's new ID.4 fully-electric SUV.

Volkswagen's Transition to Software-based Vehicles

A significant part of Volkswagen's updated ACCELERATE plan includes the integration of software into its vehicles, digital services and data-based business models which will help the automaker attract new customers and tap into additional sources of revenue. This also includes a wide rollout of vehicles capable of autonomous driving before the end of the decade. 

Volkswagen said that the integration of software into the vehicle and the digital customer experience will become a core part of the Volkswagen brand by 2030. The company is developing what it calls a "customer-centric digital ecosystem", beginning with the new ID. family of fully-electric vehicles.

Future Volkswagen models will be software-based and will receive over-the-air updates every three months the automaker announced last week. The software updates will begin this summer. VW is working with Microsoft on a cloud-based data platform to support its push into software and digital services and vehicle connectivity.

VW plans to have a networked fleet of over 500,000 vehicles on the road within two years, the company said. Since the vehicles will be updatable via OTA updates, Volkswagen said it will be able to receive feedback from customers to continuously make improvements, then be able to push them out quickly to the entire network of vehicles.

OTA vehicle software updates were pioneered by electric automaker Tesla with the Model S launch in 2012. Now other automakers are following suit, including Ford Motor Co with the new fully-electric Mustang Mach-E SUV, which supports OTA updates.

By turning its vehicles into software-based products like a smartphone, Volkswagen said its will be able to offer attractive service packages for customers that they can download to their vehicles via an OTA update. Volkswagen expects to generate additional revenue from these services, which will extend through the entire service life of the vehicle. 

These revenue streams might include autonomous driving functions that can be added to the vehicles via a subscription, which is what Tesla is exploring with its Full Self Driving feature, which customers can unlock with a one-time payment or via a monthly subscription, which is what Tesla is considering.

As part of Volkswagen's transitions to electrification, the automaker said its future model lineup will be much more simplified. The company said that future vehicle generations will be produced with a much smaller number of variants.

With this approach, each vehicle will essentially be a blank slate, allowing customers to upgrade their vehicles with software for adding new features at any time using VW's digital ecosystem, including for premium features. This will significantly reduce vehicle production complexity, the company said.

Volkswagen's ‘Trinity'

In 2026, all of Volkswagen's new vehicle technologies will be bundled into a new flagship sedan code-named "Trinity." Volkswagen said that with Trinity, all of the elements of the company's transformation will come together in a new and advanced electric sedan.

The Trinity-based vehicle will support Level 2+ autonomous driving and up to Level 4 in the future, the company said.

"Trinity will become a kind of time machine for our customers, saving them time and stress. However, this technology must not become the preserve of a select elite, which is why we are scaling it to make it available for many people," Brandstätter said.

Last month, Volkswagen announced a new partnership with Microsoft on a cloud-based software development platform. The automaker will use Microsoft's Azure cloud computing services to help the company streamline the development of software for advanced driver assist systems (ADAS) and autonomous driving.

Volkswagen plans to establish a neural network across its fleet, allowing vehicles to continuously exchange data, such as information on road conditions in real-time. The neural network will be used to create a self-learning system using the data collected from millions of vehicles to improve Volkswagen's self-driving capabilities over time.

"Volkswagen will undergo profound changes. We will epitomize not only climate-friendly e-mobility, but especially fascinating digital customer experiences, new business models and autonomous driving for many people. We have built up a strong basis for this over the last few years. Now, with ACCELERATE we will give digitalization a further push," said Brandstätter. 

Volkswagen's Plan to Increase Profitability

Volkswagen has allocated roughly 16 billion euros (US$19 billion) through 2025 for investments in e-mobility and digitalization. In order to fund this massive investment, VW will work on increasing its efficiency with ACCELERATE, targeted operating margin of at least 6% by 2023. The automaker is aiming to trim its fixed costs by 5% before 2023.

With improved margins, VW can still post a profit in North America with a decrease in sales volumes of around 15%. In South America, that number jumps as high as 30%. This will allow the automaker to weather any economic downturns and still remain profitable, which is what the world's automakers faced last year when the global pandemic caused a sudden decline in auto sales.

Volkswagen Plans to Win the EV Race

Automakers like Volkswagen are racing to develop electric vehicles to meet tighter CO2 emissions targets, especially in Europe. Swedish automaker Volvo Cars announced this week that it will only sell fully-electric vehicles by 2030. U.S. automaker General Motors also announced recently that it will only sell fully-electric passenger vehicles by 2035.  

Stellantis, the new company formed after the merger of Fiat Chrysler and PSA, plans to have fully-electric or hybrid versions of all of its vehicles available in Europe by 2025.

But simply building more electric vehicles will not alone transform an automaker. It's the digital services, connectivity and customer experience that will likely differentiate rival automakers in the future. 

It's exactly what Tesla has done with its disruptive business model without using traditional dealerships and only selling fully-electric vehicles that are connected and part of a massive network. Now Volkswagen has the similar pieces in place to become a digital mobility company.

"Of all the major manufacturers, Volkswagen has the best chance of winning the race. While competitors are still in the middle of the electric transformation, we are taking big steps toward digital transformation," Brandstaetter said.

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