Blume Suggests More Differentiation Between Volkswagen Group Brands
On December 16, an extraordinary special Volkswagen Group meeting took place in which new CEO Oliver Blume spoke about the progress he has made in the 100 days since he took over as CEO. In his remarks, he said “Nothing and no one is more important than the brands. People buy brands. They are one of the most important criteria for our customers. That is why we will position our brands even more effectively and sharpen their profile even further. Our products are the core of our success — the right product strategy, striking design criteria and high quality. When it comes to technology, our ambition is to measure ourselves against the best.”
Blume went on to say that he and his top managers have crafted a 10-point strategy for the company going forward. “This undertaking is rather like renovating a house. The foundation is solid. The structure is good, based on decades of successful work. Now we need to make the house shine in new splendor. We are tidying up the basement. Putting up new roof timbers. Moving a few walls. We are clearing out, adding new parts, dismantling old ones. Each of our 10 points is underpinned by concrete decisions we have taken in the last four months based on a tight agenda. A Board of Management member is responsible for each point. That way, we can be sure of implementation.”
Point 1: Planning Round.
The top priority is financial robustness. The goal is the more efficient use of our capital. We are sharpening our focus on the return and on net cash flow. Our ambition is also to strengthen the resilience of the individual brands and to lower the break-even point — the point at which total cost and total revenue are equal — even further.
Point 2: Products.
We are sharpening our product strategy to leverage synergies in the Group and enhance the attractiveness of our brands. We are developing clear design languages and have launched a quality offensive. The Volkswagen brand is currently examining how it can take icons such as the Golf or Tiguan into the electric future.
Point 3: China.
In China, we hold pole position in the market and operate from a position of strength. We will likely double deliveries of electric cars this year. We are accelerating the transformation by strengthening our technical development with an “in China for China” strategy. Together with Horizon Robotics we are forging ahead with the development of autonomous driving in China.
Point 4: North America.
In North America we are in the right place at the right time: more and more Americans are switching to “E”. Local assembly of the ID.4 is currently being ramped up at our plant in Chattanooga. We are looking at expanding capacity and localizing our supply chain. With our Scout project we plan to enter the attractive U.S. pickup and rugged SUV market. That is also of strategic significance for Volkswagen because we plan to diversify our business further in light of geopolitical developments.
Point 5: CARIAD.
One of our most pressing issues in recent months was realigning our software activities. One thing is clear: setting up CARIAD, our software unit, was the right decision. Now, we are moving forward with the development of CARIAD. We are looking at what core competences we have in-house and reviewing where partnerships are meaningful. We have redefined the interfaces with our brands and are optimizing processes and tools. We are improving the software in current volume models with ranges of up to 700 km and a maximum charging capacity of around 200 kW. And we will be rolling out a high performance software for our premium brands next year. The long term goal is a unified software for the Group that will enable us to maximize scaling benefits.
Point 6: SSP strategy and technology.
With the new software road map, we have also agreed on the sequence for vehicle projects in the coming years. We have defined the technology profiles for our Scalable Systems Platform – a scalable modular system that we will roll out at all brands by the end of the decade. To that end, we have allocated power ranges to the brand groups so that there will be no more overlaps in future. That allows us to leverage synergies even more effectively going forward.
Point 7: Battery, Charging and Energy.
We presented our power road map to the public in spring 2021. The locations for three of the six planned battery factories in Europe have already been decided. The decision on a site in Eastern Europe should follow soon and we will begin investigating sites in Canada soon as well. We signed a memorandum of understanding on raw material security with the Canadian government a fortnight ago. This week, we launched our joint venture with Enel in Italy in the field of charging and energy. As a result, we have moved another step closer to our target of establishing 45,000 fast charging points worldwide by 2025.
Point 8: Mobility solutions.
We have signed off a business plan designed to introduce a mobility app next year. This app will cover the ecosystem of mobile services, from financing, leasing and rental through to subscription models, and will apply for all brands. The mobility platform that we are building with Europcar is thus taking shape. At the same time, following our withdrawal from the Argo AI partnership in October, we are reviewing the business model for mobility as a service. In the field of individual transportation, we will continue our autonomous driving activities with Audi and Porsche.
Point 9: Sustainability.
We are currently redesigning our sustainability strategy. The next step is ambitious ESG goals that we are breaking down to brand and division level. Our aim is for the brands and sites to bear their overall responsibility for these goals. This will culminate in standardized ESG profiles for all brands.
Point 10: Capital market.
I am firmly resolved to achieve a sustainable increase in the value of our company. Everyone benefits from that — our owners, our employees, our customers and you as shareholders. That is why we are developing virtual equity stories for our brands and value drivers in the Group. Our ambition is to visualize the strengths of our Group and enhance value for the long term. We will be presenting the first results at a Capital Markets Day in the second quarter next year.
The Future Of Volkswagen
Well, if anyone had any doubts about Oliver Blume taking his new duties seriously, they should be dispelled by those remarks. There are some interesting clues in there about the Scalable Systems Platform, something that began when Herbert Diess had his hand on the tiller but seemed to have been put on the back burner as Blume began talking about an expended MEB+ platform. Now we know SSP is coming, if not until later this decade.
Blume’s remarks about allocating power ranges to various Volkswagen Brand groups to minimize overlap are also interesting. Is he thinking of structuring VW in much the same way that GM has done historically — offering a range of vehicles at different price points but all within the overall structure of the company? That certainly seems like the logical conclusion to draw from his remarks. That trend will bear close watching.
Overall, this is a clear eyed and rational approach to the future of Volkswagen. Perhaps more than anything else it needs to get it CARIAD division sorted. Volkswagen software is sort of a joke in the industry at the moment. Everything in Blume’s 10-point plan seems to hinge on delivering on his promise to become an industry software leader instead of a laggard.
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