Volkswagen Lays Out 2030 Strategy, Raises Margin Target -- Update
July 13 2021 - 12:14PM
Dow Jones News
By Kim Richters
Volkswagen AG on Tuesday raised its midterm profitability
target, honing its ambitions to shift to battery-electric vehicles
and tap future revenue streams from software and mobility services
through the end of the decade.
The German car maker, whose brands include namesake VW cars,
Seat, Skoda, Audi and Porsche, now targets an operating return on
sales of 8% to 9% in 2025, up from 7% to 8% previously.
The guidance came as the car maker presented its strategy
through 2030, fleshing out plans for battery plants, software and
technology synergies.
"We set ourselves a strategic target to become global market
leader in electric vehicles--and we are well on track," said
Volkswagen's Chief Executive Herbert Diess, whose mandate was
recently extended until late 2025.
"Based on software, the next much more radical change is the
transition towards much safer, smarter and finally autonomous
cars," Mr. Diess said, as the auto maker stressed its expectation
of profit and revenue pools to gradually transition from cars with
internal combustion engines to battery-electric vehicles, software
and services.
Integral to Volkswagen's strategy is securing battery supply and
taking control of production by investing in six large battery
factories across Europe. As announced in March this year, the
factories, including one in Sweden operated by partner Northvolt
AB, should have a total production capacity of 240 gigawatt hours
by 2030.
On Tuesday, the auto maker said it is also teaming up with
China's Gotion High-Tech for one plant in Salzgitter, Germany, and
will start production there in 2025. Another factory could be
opened in Spain with another partner, with the intention of making
the country a strategic pillar of its electric plans, the auto
maker said.
While Volkswagen expects the market for internal combustion
engines to decline by more than 20% over the next 10 years, the
business's current robust margins and strong cashflows is helping
to finance and accelerate the company's shift to battery-electric
vehicles, it said.
It had already earmarked 73 billion euros ($86.60 billion) for
investments in what it describes as future technologies from 2021
through 2025, representing half of its total investments--and a
share that it expects to increase in the future.
Analysts view Volkswagen's electric strategy as positive but
some have pointed to slow fully-electric vehicle sales, in
particular the performance of the company's flagship ID vehicles in
China. While Volkswagen plans a 50% battery-electric vehicle share
in global deliveries and a share of around 60% in Europe by 2030,
the car maker's global BEV share was around 2.5% in 2020.
"Volkswagen is at the forefront of the first disruption stage in
the automotive industry, electric mobility. In the second
disruption stage, autonomous driving, this is likely to be much
more difficult in view of the tech companies," said Frank Schwope,
analyst at German bank NORD/LB.
Write to Kim Richters at kim.richters@wsj.com
(END) Dow Jones Newswires
July 13, 2021 12:12 ET (16:12 GMT)
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