VW Aims to Overhaul Business by 2025

Volkswagen AG aims to transform its product lineup with more electrified and autonomous vehicle technologies, consolidate its components business and boost profits.

By adding new revenue streams and improving efficiencies, VW aims to increase its profit margins from 6% last year to at least 7% by 2025. The group targets a 15% return on capital for its automotive operations.

As expected, the plan outlined earlier today does not address criticisms of the group's insular supervisory board and historically autocratic management structure. Minority shareholders have been calling for greater representation by outside board members. VW acknowledges it must adopt a more open, value-driven corporate culture that’s “rooted in integrity.”

Still, VW declares its Together-Strategy 2025 as the “biggest change process” in the company’s history as it attempts to distance itself from its diesel-emissions cheating scandal. VW promises to reveal detailed implementation steps, broken down for its 12 brands and including financial targets, by the end of the year.

The plan will introduce more than 30 electric vehicles by 2025 in a bid to hike annual EV sales to at least two million units. The company expects its EVs, aided by more powerful batteries, to generate 20%-25% of its global sales, in line with its forecast of overall market demand for electrics.

VW also says it will review and streamline its modular architectures to help reduce development and production complexities, increase efficiency and reduce costs. And it plans to develop new competencies in the area of autonomous driving and artificial intelligence, with a goal of developing and licensing its own self-driving system by the end of the decade.

In addition, VW says it is forming a cross-brand mobility solutions business to develop and acquire ride-hailing, car-sharing, automated-taxi and “transportation on demand” services. Its first foray into this market was last month’s $300 million investment in Israeli-based ride-hailing provider Gett. VW expects to generate billions of euros in revenue from new mobility services by 2025. To facilitate growth in this area, VW says it will rely more heavily on partnerships, acquisitions and venture capital investments.

The company also plans to continue to expand its operations in China and other Asian countries by adding more regional partners. The focus in these markets will be on economy cars.