Author: Sun Xiaoshu

On the evening of July 13th, Beijing time, Volkswagen Group unveiled its 2030 “NEW AUTO” strategy in Wolfsburg.

Herbert Diess, CEO of Volkswagen Group who had just completed the renewal contract, said at the beginning of the press conference that the automotive industry is facing revolutionary changes based on the development of software technology. Cars are evolving towards safer and smarter products and will eventually achieve autonomous driving.

The strategic goal of Volkswagen Group is to become the leader in the global pure electric vehicle market, and the ultimate goal is to transform from a car manufacturer to a provider of intelligent mobile travel services.

The ten-year journey towards “NEW AUTO” involves two core technologies: electrification and intelligence, and four core technology platforms: the scalable platform SSP, battery and charging platform, CARIAD software platform, and mobile travel service platform.

Implementing a platform strategy to achieve greater scale and synergy is the core play of Volkswagen’s strategic transformation.

SSP: The Ultimate Form of Platform Strategy

Driven by electrification, the profit source of the automotive industry is shifting from traditional internal combustion engine vehicles to electric vehicles. Volkswagen expects that profits from fuel vehicles will decline by more than 20% over the next decade. Under the trend of electrification, Volkswagen has launched the pure electric platform MEB based on the experience of gasoline vehicle platforms MQB, MLB, and MSB, and will soon launch the PPE platform to promote electrification transformation.

However, Volkswagen’s ultimate goal is to launch the scalable platform SSP “Scalable Systems Platform” in 2026, which will be used as a super platform to build all brands and levels of models under Volkswagen Group. Volkswagen will invest 800 million euros to establish a new R&D institution in Wolfsburg to be responsible for the design of core modules of the SSP platform. Volkswagen’s factory in Anhui will be the production and manufacturing base of the SSP in China. During the entire lifecycle, SSP will cover the production of more than 40 million vehicles.One of the most significant advantages of SSP is its ability to reduce the complexity of mechatronics integration. In this software-defined automotive era, it enables Volkswagen to better cope with software challenges. Additionally, SSP can further reduce investment, R&D, and production costs compared to MEB and PPE. Furthermore, like MEB, SSP will be open to other manufacturers, enabling cost sharing.

Audi CEO Markus Duesmann mentioned that “the introduction of SSP is to fully utilize our advantages in platform management, maximizing synergy effects among different fields and brands.”

In order to take advantage of brand synergies, the Volkswagen Group has already conducted a brand restructuring, including Bentley, Ducati, Lamborghini, etc. under the Audi brand, focusing on the luxury market. Bugatti now falls under Porsche, focusing on the ultra-luxury sports car market. At the same time, Skoda and Seat, together with the Volkswagen brand, continue to maintain affordable pricing and cost-performance positioning. The recently established TRATON focuses on the commercial vehicle market, forming a three-dimensional brand matrix layout.

Looking back, in Volkswagen’s previous ‘TOGETHER 2025+’ strategy, the goal of reducing costs by reducing the number of brands and product types was proposed. However, the brand synergies proposed by ‘2030 NEW AUTO’ can be seen as Volkswagen’s continuation of its “cost reduction and time-saving” strategy, with a shift to the ultimate form of platform strategy – SSP.

In 2030, power will be Volkswagen Group’s core competitiveness, and the two pillars of power will be “batteries and systems” and “charging and energy.” The standard cell (Unidied Cell) announced on Power Day will be the core competitiveness of Volkswagen’s battery system. The standard cell will be a square battery that can be compatible with different cell materials. Volkswagen will use lithium iron phosphate batteries in entry-level models and high-nickel ternary lithium batteries in mainstream models.The standard battery cell also has the capability to be compatible with future battery innovations. In terms of battery cell materials, it retains the potential to be compatible with high-silicon batteries and solid-state batteries. In terms of battery layout, it can not only adapt to the current cell-battery module-battery pack-chassis (Cell to Module) form, but also evolve to the cell-battery pack-chassis (Cell to Pack) and ultimately the cell-chassis (Cell to Chassis) form, to improve the energy utilization efficiency of the entire vehicle.

Thanks to the introduction of the standard battery cell, the SSP platform can reduce the existing 22 different battery systems within the Volkswagen Group to 8, reducing complexity and improving standardization, bringing more considerable financial performance to the Volkswagen Group. By 2030, the installation rate of Volkswagen’s standard battery cell is expected to reach 80%, which can reduce Volkswagen’s battery cost by 50%.

The shortage of power battery supply has been a dark cloud over the electric vehicle industry in recent years. According to the forecast of South Korean company SNE Research, the demand for power batteries for electric vehicles worldwide will reach 406 GWh in 2023, while the supply of power batteries is expected to be 335 GWh, with a gap of about 18%.

Facing the pressure of power battery demand and the industrial reshuffle brought by electrification, Volkswagen is also committed to establishing a controllable battery supply chain. Volkswagen’s plan is to create a closed loop in the battery value chain by establishing new partnerships, realizing the most sustainable and cost-effective way of battery manufacturing.

Volkswagen’s goal is to increase the capacity of its European battery factories to 240 GWh by 2030. The first factory in the European battery production plan is the Skellefte factory established by Volkswagen in cooperation with Swedish lithium battery developer and manufacturer Northvolt, and Volkswagen has just invested an additional 500 million euros in it. The second project will be in Germany. On July 12, the Volkswagen Group reached an agreement with Chinese power battery manufacturer Guoxuan High-Tech to build the Salzgitter factory in Germany, which will begin to produce Volkswagen standard battery cells in 2025.# Volkswagen is considering establishing the entire electric vehicle industry chain in Spain, which would be another important area for Volkswagen’s strategic transformation.

Volkswagen Group is currently evaluating the selection of a battery factory in Spain, with a planned annual production capacity of 40 GWh. According to Thomas Schmall, CEO of Volkswagen Component, “Volkswagen’s controlled battery supply chain will enable us to have cost control capabilities.” In fact, through the SSP platform, standard battery cells and battery supply chain control, Volkswagen plans to achieve a 5% fixed cost and 7% material cost reduction plan in the next two years.

Volkswagen Group has also raised its expected operating sales profitability for 2025 from 7-8% to 8-9%, which will serve as the basis for the 70th round of internal planning in November 2021.

As for the charging and energy platforms, Volkswagen announced its power management plan on its Power Day, which will be carried out step by step.

In Europe, Volkswagen is working with companies such as BP, Iberdrola, and Enel to provide convenient charging services for European customers, planning to create the world’s largest public high-power charging network. Among them, the company established by Volkswagen and Enel will have and operate a high-power (HPC) network infrastructure by 2025, with more than 3,000 charging points in Italy, and each charging point can reach a maximum power of 350 kW.

In North America, Volkswagen is cooperating with Electrify America to plan to more than double its charging infrastructure in North America by 2025 and add more than 10,000 charging stations. This expansion includes 150 kW and 350 kW charging facilities.

In China, Volkswagen has formed a joint venture with FAW, JAC, and Star Charge called CAMS, with plans to deploy 500 charging stations and 6,000 charging piles in the Chinese market, covering eight major cities in the first phase. By 2025, Volkswagen will set up 17,000 charging piles through CAMS, covering most cities and with charging power ranging from 120 kW to 300 kW.

Software Platform# Volkswagen aims to become a software-driven mobility provider by 2030

According to Arno Antlitz, CFO of Volkswagen, “By 2030, software-driven sales are expected to reach €1.2 trillion, and the entire smart car market is poised to increase from the current €2 trillion to €5 trillion, 10 times that of the mobile phone market.” Of these, the personal mobility industry will account for 85% of the market share, which is considered to be the future business core of Volkswagen.

Software plays a decisive role in Volkswagen’s transformation from car manufacturer to smart mobility service provider. The main force behind Volkswagen’s digital transformation is its car software company, CARIAD, established in March of this year.

The software platform E31.1 developed by CARIAD is the beginning of Volkswagen’s digital transformation. E31.1 has been installed on Volkswagen ID.3, ID.4, Skoda Enyaq, and other models, which has achieved OTA capability, although it is still just a car infotainment system. E31.2, to be launched in 2023, will provide a unified information and entertainment system and OTA capability for high-end brands Audi and Porsche.

In 2025, CARIAD will release the scalable software platform and end-to-end electrical and electronic architecture E32.0. E32.0 will include a unified operating system that can be used for all brands of the Volkswagen Group, realizing platform collaboration at the software level. The most important significance of E32.0 is the adaptation to L4 level autonomous driving.

E32.0 software platform and the SSP mechatronics integrated platform were launched almost at the same time. Volkswagen’s vision is to have up to 40 million cars from different brands of the Volkswagen Group running on its software platform by 2030, based on the combination of the two. Through a constantly connected autonomous driving system, the autonomous driving fleet can learn from real-time data, continuously update functions and services.

Based on this, Volkswagen can launch a new ecosystem, a new data-based business model.

Solution for Mobile Travel

Dirk Hilgenberg, CEO of CARIAD, stated that “By 2030, autonomous driving will become the main source of revenue in the automotive industry.” In fact, the future commercial prospects of autonomous driving are also very promising. By 2030, the market value of autonomous driving car services in the five major European markets alone is expected to reach $70 billion.So, “Mobility as a Service” and “Transportation as a Service” are important components of Volkswagen’s “NEW AUTO”, including four business areas: autonomous driving systems, autonomous driving car integration, fleet management, and mobile platforms. The cornerstone of these businesses is the system capabilities of autonomous driving fleets.

In terms of specific products, the Volkswagen brand will launch the ID.BUZZ with the latest autonomous driving technology in 2021, while the Audi brand will launch a new pure electric vehicle with L4 level autonomous driving technology in 2022. As for the release of fully autonomous driving models, Volkswagen’s deadline is 2030.

Volkswagen plans to launch the first autonomous driving car service in Europe in 2025, followed by the United States. Over the next few years, Volkswagen will also launch a travel platform that integrates all of the company’s mobile products, ultimately covering all travel services such as leasing, subscription, sharing, and calling. This platform will bring huge market share and additional revenue to Volkswagen.

As autonomous driving technology matures and even becomes fully implemented, this mobile travel platform will also usher in its ultimate mode. When will this happen? Volkswagen’s “NEW AUTO” has given us the answer, which also happens to coincide with the ten-year commitment made by Dr. Herbert Diess to Volkswagen: 2030.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.