Volkswagen Shares its Bold ‘NEW AUTO' Strategy, Which Includes Building Millions of Software-Based EVs

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【Summary】Automaker Volkswagen Group shared its updated vision to transform into an advanced mobility company over the next decade, which includes investments in battery technology and software-based electric vehicles that can be updated over-the-air. The plan, called NEW AUTO strategy through 2030, will transform Volkswagen into an electric mobility provider and software-driven technology company.

Eric Walz    Aug 19, 2021 7:30 PM PT
Volkswagen Shares its Bold ‘NEW AUTO' Strategy, Which Includes Building Millions of Software-Based EVs
Dr. Herbert Diess, Chairman of the Board of Management at Volkswagen, speaks about the company's NEW AUTO strategy.

Automaker Volkswagen Group shared its updated vision to transform into an advanced mobility company over the next decade, which includes investments in battery technology and software-based vehicles that can be updated over-the-air.

The plans will transform Volkswagen into an electric mobility provider and software-driven technology company.

By 2030, the Volkswagen Group plans to reduce its carbon footprint per car by 30% over its lifecycle. The company also aims for 50% of its model lineup to be fully-electric by then and nearly 100% of all vehicles in major markets will be zero-emissions by 2040.

By 2050 at the latest, Volkswagen said it intends to be a climate neutral car company.

As Volkswagen transitions to electrification, the automaker expects that the demand for combustion engine vehicles will decline by 20% over the next decade. With the transition, the company expects that profits will shift from vehicle sales to software and digital services over the life of a vehicle.

By 2030, the automaker believes that software enabled sales could add around one third on top of its battery and combustion engine vehicle sales. Volkswagen said that sales of passenger vehicles are still expected to account for 85% of the market and its future business. 

This will help fund the automaker's transition to electric vehicles by increasing the Group's profit margins. Volkswagen raised its ambition level for operating return on vehicle sales from 7‐8% to 8‐9% by 2025. Volkswagen is also committed to reducing its material costs by roughly 7% and is optimizing its business with fewer combustion engine models and a better price mix. 

Volkswagen has already committed billions for its transformation. The automaker has earmarked €73 billion for future technologies through 2025, representing 50% of its total investments. 

The share of investments into electrification and digitalization will also be further increased, the company said. 

"We intend to install industry leading platforms across strong brands, to be able to have more scale and capture even more synergies in the future", Volkswagen Group CFO Arno Antlitz said. "During this transition, our robust ICE business will help to generate the profits and cash flows to do so."

A Universal EV Architecture & Software Platform for Future Volkswagen Vehicles

One of the ways Volkswagen intends to reduce costs is by using a single universal software platform for future models. The global vehicle software platform also allows Volkswagen to more easily bundle a range of digital services for new revenue streams.

Volkwagen's new global software platform will be a cloud-connected and scalable end-to-end electronic architecture that supports features such as level 4 autonomous driving. The software stack will serve as a unified operating system for all VW vehicles and will support over-the-air software updates. 

The autonomous driving capabilities for example, can be improved by collecting real-time data from VW's future connected fleet. Volkswagen calls it a "Big Loop Process", in which it will collect data from millions of vehicles. This data can be used to make software improvements, which then can be pushed out to the entire fleet via OTA updates. 

With a fleet of connected and autonomous vehicles, the VW Group is poised to create the largest network of connected vehicles worldwide.

Volkswagen's automotive software company CARIAD plans to develop the new platform by 2025. By 2030, up to 40 million vehicles across VW's brands will be operating on the Group´s software platforms. CARIAD is also tasked to develop level-4 automated driving capabilities for the Group's passenger vehicles. 

"Software plays the decisive role in the transformation from a pure car company to an integrated mobility group. By 2030, software, on the basis of automated driving, can become a major source of income in our industry," said CARIAD CEO Dirk Hilgenberg. 

Volkswagen's next-generation EV platform is called the SSP (Scalable Systems Platform). It will significantly reduce complexity over time by sharing core components between models. The automaker plans to consolidate three combustion engine platforms and two EV platforms into a unified architecture for Volkswagen's entire portfolio. 

The automaker plans to start the production of pure electric vehicles on the highly scalable SSP in 2026. The SSP could serve as the foundation for millions of vehicles. Volkswagen said its SSP will be open to other automakers as well.

Volkswagen said it will invest around €800 million in a new R&D facility in Wolfsburg, where the core components of the SSP platform and its modules will be designed.

"Introducing the SSP means leveraging our strengths in platform management and building on our capabilities to maximize synergies across segments and brands. In the long run, our SSP will significantly reduce complexity in mechatronics," said Markus Duesmann, CEO of Volkswagen's luxury brand Audi. 

EV Battery Production at Scale

Volkwagen will also need to make significant investments in battery production in order to build millions of EVs. Automakers are entering into strategic partnerships with battery manufacturers to secure batteries, which is what Tesla did with Panasonic for its Nevada gigafactory and General Motors is doing with its battery partner LG Energy Solution.

Volkswagen plans to establish an entire battery supply chain, from raw material to recycling. The goal is to create a closed loop in the battery value chain as the most sustainable and cost-effective way to build millions of EV batteries.

The Volkswagen Group will focus on two core pillars for batteries, "battery cell & system" and "charging & energy" under a new technology division. Part of this work will include developing a new unified battery cell design with up to 50% cost reduction by mid-decade and up to 80% by 2030.

Volkswagen aims to operate six giga factories in Europe with a total production capacity of 240 GWh by 2030.

The first battery factory will be located in Skellefteå, Sweden and operated by Northvolt AB, which is also Volvo's battery partner. Volkswagen Group invested an additional €500 million in Northvolt and is working with the company to start production in 2023.

The second battery plant will be in Salzgitter, Germany. Volkswagen signed an agreement with Chinese cell specialist Gotion High-Tech as its technological partner for a start of production in 2025. 

A third location is planned for Spain, which is an important market for Volkswagen's future EVs. Volkwagen is considering establishing an entire value chain of electric cars in Spain with the option to establish a giga factory there with a strategic partner. The automaker intends to have a yearly capacity of 40 GWh hours in Spain. The automaker expects that its smaller electric vehicles will be produced in Spain starting in 2025.

VW's Autonomous Driving Plans

By 2030, Volkswagen said it will have the systems in place to support autonomous shuttle fleets. Mobility-as-a-Service (MaaS) using fully autonomous vehicles will be an integral part of the company's NEW AUTO strategy. 

This value chain consists of four business areas; the self-driving system, its integration into vehicles, the fleet management and the mobility platform itself.

Volkswagen Group is already developing a self-driving system for autonomous shuttles with its strategic partner ARGO AI, a Pittsburgh-based company that is also working with U.S. automaker Ford Motor Co on the technology.

"By the end of the decade, automated driving will completely change the world of mobility," said Christian Senger, CTO of Volkswagen Commercial Vehicles. "Together with ARGO AI, we are developing an industry leading self-driving system which will enable us to offer completely new mobility services and autonomous transport services. Volkswagen Group is aiming for a significant market share and additional revenue streams in this important future business."

In May, Volkswagen said it will begin testing its first autonomous commercial vehicles by this summer with Argo AI. The automaker's Commercial Vehicles division will launch international trials of the upcoming ID. BUZZ electric van outfitted with self-driving technology developed by Argo AI.

Volkswagen Group is currently testing the first autonomous buses and is planning to roll out similar projects in other cities in Germany, China and eventually U.S. In 2025, Volkswagen plans to offer its first autonomous mobility service in Europe. 

The total market for mobility as a service in the five largest European markets alone is expected to amount to $70 billion. However after Europe and China, North America will be the VW Group's main focus to grow its commercial mobility business.

"In regard to the U.S. market, there has never been a better point in time for Volkswagen to significantly increase its market share," said VW Group CEO Herbert Diess. "The Biden administration's electrification plan gives us a unique opportunity to start from a better position than the competition, having built up an open charging infrastructure across the U.S. and having invested in the transition towards BEVs in Chattanooga already."

Deiss is referring to VW's electric vehicle factory in Chattanooga, Tennessee, which will be its North American center for electric vehicle production. The automaker is building a new Engineering and Planning Center (EPC) in Chattanooga to test its EV batteries and also for engineering the EVs of the future, the automaker said.

The Chattanooga assembly plant will include new production lines for both battery cell and battery packs that will be installed in the company's future electric vehicles.

Volkswagen's NEW AUTO strategy 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 plans to introduce one new electric model every year.

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