Goals and Strategies

With the Group strategy “NEW AUTO – Mobility for generations to come”, we are preparing ourselves for the global changes in mobility and thus playing a substantial role in driving Volkswagen’s transformation into a provider of sustainable mobility.

In the context of the fast-changing environment and the challenges resulting from it, the Group Board of Management adopted the Group strategy “NEW AUTO – Mobility for generations to come” in May 2021 with the approval of the Supervisory Board. The strategy’s focus is the world of mobility in 2030.

As technology advances, the automotive industry is rapidly forging ahead with its transformation toward e-mobility and digitalization. We therefore expect the market for electric vehicles to continue to grow in the next few years, meaning that the cost-efficient and sustainable production of battery systems and the expansion of the charging infrastructure will be crucial to success.

The shift to connected, intelligent and eventually self-driving vehicles will, however, bring more wide-reaching changes for the automotive industry. Autonomous driving will change the customer’s mobility experience forever and lay the ground for new business models. Sources of revenue will gradually shift and will expand beyond the core product of the automobile. Increasing software development capabilities in order to excite customers with constantly improving digital functionality is the prerequisite for this.

In equal measure to technological trends, the global economic and geopolitical environment is also posing increased challenges for the automotive industry. These include, for example, the economic influence of the largest mobility market, China, the USA and Europe, and their diverging development.

Sustainability will continue to be a recurring theme in the business world and will gain further pertinence, driven by the increasingly noticeable consequences of climate change, a greater consciousness of sustainable lifestyles on the part of the customer and, not least, underlying factors such as the Paris Climate Agreement. As we transition from automotive manufacturer to mobility group, we have reset our priorities with NEW AUTO and are positioning ourselves for the future. We are keeping our aim of being a world-leading provider of sustainable mobility firmly in our sights and making the Group more focused, efficient, innovative, customer-oriented and sustainable, as well as systematically gearing it toward profitable growth.

To this end, we have established clearly defined Group initiatives across the brand groups, with a focus on our central technology platforms: “Architecture”, “Software”, “Battery, Charging & Energy”, and “Volkswagen Group Mobility”. Furthermore, base initiatives form the foundation for the Volkswagen Group’s strategic realignment. These are “ESG, Decarbonization & Integrity”, “Business Model 2.0”, “North America (NAR) Region”, “China Region”, “Group Steering Model”, “People & Transformation” and “Financing the Transformation”, which are described below.

NEW AUTO FOCUSING ON THE TECHNOLOGY PLATFORMS

The most important targets for each calendar year are defined and a Top 10 program is developed at Group level so that the strategy can be implemented in operations throughout the year. Priorities in the Group’s Top 10 program for 2023 were financial robustness and planning, products, the China and North America regions, software, technologies, battery and charging, mobility solutions, sustainability, and capital markets. This Top 10 program methodology has been adopted by many business units in their functional area strategies and is being used to accelerate implementation of the strategy with a high level of focus.

To make the progress in our focus topics – consisting of the initiatives of the NEW AUTO strategy and the objectives of the Group’s Top 10 program applicable to the fiscal year – as transparent as possible for management and employees, the Group Board of Management decided to structure and regularly measure the strategic objectives and milestones using the OKR (Objectives and Key Results) method. Accordingly, strategic objectives and envisaged key results are defined for all focus topics. These are to be realized largely through time-limited projects and work packages, each of which is measured by specific key performance indicators. The degree of achievement is usually presented to the Board of Management three times a year. As such, the relevance of the focus topics, and their objectives, milestones, projects and work packages, are regularly reviewed at Group level. Their focus is continuously monitored and adjusted as necessary or integrated into standard operations.

We report on the main objectives and interim results achieved in the reporting year in the chapters “Internal Management System and Key Performance Indicators”, “Structure and Business Activities” and “Sustainable Value Enhancement”.

ARCHITECTURE

A future-oriented mechatronics platform will form the backbone for innovations, technology and lasting competitiveness at Volkswagen. With the Scalable Systems Platform (SSP), we are creating the next generation of an all-electric, fully digital and highly scalable mechatronics platform based on a standardized software architecture. With this standardized platform, which can be scaled from the smallest vehicles all the way up to the premium segment, the Volkswagen Group aims to rapidly and efficiently provide its customers with innovative functions and technologies in their vehicles, across all brands. By reducing complexity and the number of versions, the SSP will offer maximum synergies and make fast, regular technology updates possible, while lowering investment costs and ensuring the necessary differentiation between the products of the individual brands in the Group’s portfolio.

SOFTWARE

The purpose of the Group’s own software and technology company CARIAD is to create the technical basis for data-based business models, new mobility services and automated driving (Level 4), and to leverage cross-brand synergies. Here we are pursuing the following strategy: we intend to develop software for central control points in the vehicle either in-house or together with third parties in strategic partnerships. CARIAD is collaborating with leading technology companies to integrate further innovative solutions.

Together with the Porsche and Audi brands, CARIAD is working to introduce the new E³ 1.2 platform, which optimizes the interaction between the hardware and the vehicle software and is also intended to serve as a key lever for data-driven development and for the introduction of new services even after vehicle production has begun.

In the long term, the standardized E³ 2.0 software architecture is to form the basis of a complete digital ecosystem, offering customers a wide range of software-based services throughout the entire product lifecycle. The software-centric approach of the E³ 2.0 architecture constitutes a paradigm shift in vehicle development. This is to form the basis for the Volkswagen Group’s software-defined vehicles. The aim is for every function that is needed or requested, and for every service, to be customized for the customers in the various markets and to be available for download at any time. This will also open up new sources of revenue for us.

Applications at various levels of automated driving (up to Level 4) are to be gradually introduced to the new vehicle models in the Group brands. In this context, CARIAD is responsible for developing software and a technology stack for automated driving.

BATTERY, CHARGING & ENERGY – CELL AND BATTERY STRATEGY

The battery is a key component in an electric vehicle, and an important cost factor. The appeal and market success of e-mobility is determined not only by the price, but also by the vehicle’s range and its charging speed. In order to achieve our objective of transforming into a world-leading provider of sustainable mobility, we intend to become a profit-generating expert across the entire battery life cycle. To this end, the Cell and Battery Strategy tech initiative pools expertise across the Group and is driving the transformation process in cooperation with our strategic partners.

The aspects covered include battery development, cell production, vertical integration, large-scale storage systems and recycling. Our primary aim is to develop battery cell technology into a core competence in the Group, and we are also working with partners to achieve this. At the heart of this strategy is the unified cell, which can contain differing chemistries and is to be used in up to 80% of Group models by 2030. The economies of scale this generates are expected to reduce costs by up to 50% and put us in a leading cost position. To cover the high demand for battery cells, Volkswagen plans to build its own gigafactories around the world. The cornerstone for these activities was laid in Salzgitter/Germany. Using the standard factory concept to optimize investment, further factories are to follow swiftly in Valencia/Spain and St. Thomas/Canada. The aim is to meet about half of the rapidly growing need for battery cells ourselves by 2030.

BATTERY, CHARGING & ENERGY – CHARGING AND ENERGY SERVICES

A sustainable, stable charging and energy infrastructure is a key prerequisite for accelerating the transformation to the battery-electric mobility of the future. It is therefore our intention to also become a comprehensive charging and energy service provider in future and we are investing heavily in the worldwide development of an open, fast-charging network. By 2025, we and our partners plan to create around 45,000 high-power charging points in Europe, China and the USA. The product portfolio also includes the full range of charging solutions for private customers and companies. In addition to our own wall box and flexible fast-charging station (Flexpole), the focus is particularly on contract-based charging services and smart green electricity tariffs. The aim is for charging processes to be controlled in such a way that they tap into renewable energy, thus reducing the pressure on the power grids. In a next step, Volkswagen intends to use the electric vehicle as a mobile power bank, and thus help to enable electric vehicles to act as additional storage units and become an active part of the energy system in the future. In this way, Volkswagen wishes to make its customers part of the smart-charging and energy ecosystem for decarbonized mobility. Our goal here is farsighted use of scarce resources in the electric power industry.

VOLKSWAGEN GROUP MOBILITY

In keeping with its mission statement, “Mobility for generations to come”, the Volkswagen Group is developing mobility solutions for the future, taking into account global trends and changes in customer needs. The Group plans to bring together all of its brands’ mobility services on one mobility platform over the coming years. Autonomous driving combined with new mobility solutions is expected to mark Volkswagen’s transformation into a leading provider of sustainable mobility. A vehicle fleet covering all of the many services, from vehicle rental to car subscription and ride pooling, is to ensure high availability, usage and profitability. With these solutions, we plan to gain market shares and generate long-term competitive and attractive margins.

ESG, DECARBONIZATION AND INTEGRITY

ESG (Environmental, Social and Governance) refers to the basic principles of doing business sustainably. The Group’s stakeholders (e.g. investors, employees, customers and non-government organizations) have high expectations of the Company’s ESG performance, including in areas such as decarbonization, circular economy and integrity, and also of its conduct as an employer and as part of society. The Group’s ESG performance therefore directly affects its market capitalization, cost of capital and investing activities. We aim for a top position relative to our competitors in sustainability ratings. We are committed to the Paris Climate Agreement and align our own activities with the 1.5-degree target. We aim to achieve net carbon neutrality by 2050. By 2030, we have also set ourselves the target of reducing CO₂ emissions from passenger cars and light commercial vehicles over the total life cycle by 30% compared with 2018. As part of this effort, we are looking for ways to increase the proportion of renewable energy sources used in the product emergence process and the proportion of recyclable materials in our vehicles. We also wish to be perceived as a benchmark for ethical corporate conduct. Volkswagen sees itself as an equal opportunities employer. The intention is therefore for at least a fifth of Group management positions to be held by women by 2025, and for at least a quarter to be held by international managers.

BUSINESS MODEL 2.0

The Business Model 2.0 base initiative is developing a Group-wide portfolio of services, the purpose of which is to create a seamless and innovative product experience to connect brands, customers, dealerships, our partners and whole markets. The aim is for the key technologies needed for this to be integrated into a majority of the platform-based vehicles by 2030. Using connected vehicles, the Group’s brands are to be able in future to remain in contact with their customers throughout the entire vehicle life cycle and thus to offer them services and functions for their individual needs. This will allow us to build a competitive, data-driven service portfolio that also maintains our strong position in the automotive market in future.

NORTH AMERICA (NAR) REGION

For the Volkswagen Group, the North America region, and particularly the USA, has great growth potential, especially where e-mobility is concerned. We intend North America to become our third core region alongside Europe and China by 2030. Our aim there is to achieve a very strong increase in total market share for the Volkswagen Group by then.

We aspire to further expand our presence in the region with strong brands and prepare ourselves for the future with market-specific products.

We also wish to participate to a disproportionately high extent in the growth of the increasingly electrified markets in the USA and Canada. We will therefore substantially expand our range of all-electric models across the Group and develop models specifically for these markets. With our new vehicle brand Scout, we intend to address the core segments of the North American electric vehicle market with tailor-made products. The proportion of battery-electric vehicles in our sales in the USA and Canada is to increase to 55% by 2030.

In addition, we wish to maximize the potential for synergies in the region and build more expertise, industrial capacity and vertical value chains in the North America region.

CHINA REGION

China is of major strategic significance to the Volkswagen Group as its largest single market. All key measures are therefore brought together in this strategic base initiative in order to continue Volkswagen’s success story in China. These include localized development activities that are tailored to the market (the in China for China approach), competitive products, the deepening of our existing partnerships and forging of new ones, and a comprehensive program of measures for achieving a permanent reduction of costs to safeguard long-term profitability.

Our aim for 2030 is to take a leading role in China as an international mobility provider and manufacturer of fully connected vehicles. As part of our localization strategy (in China for China), we therefore want to pool and expand our local development capacity to a greater extent in the coming years. In so doing, we want to considerably speed up the development of intelligent connected vehicles (ICVs) and be in a position to offer tailor-made products to our Chinese customers faster. In the market for vehicles with conventional drive systems, we want to further strengthen our share of the market with new vehicles and secure it for the long term, as these vehicles’ high unit sales will also make a corresponding contribution to profitability in future.

GROUP STEERING MODEL

To achieve the objectives of the Group strategy and thereby safeguard the Volkswagen Group’s long-term success, we are extensively optimizing our Group Steering Model. It is essential that we establish a consistently high level of mechanisms that facilitate swift decision-making, the development and use of platform technologies and the exploitation of synergies, and that we constantly enhance these. The updated Group Steering Model places the brand groups and technology platforms center stage in order to scale up the latter while maximizing synergies across the entire Group product portfolio. A new strategy and product planning process that has been optimized for efficiency is being developed on the basis of this approach. The package of measures for this initiative hones the definition of roles and responsibilities in the Group and improves transparency in this respect both inside and outside the Company. It also promotes the entrepreneurship of the independent units and brands and at the same time strengthens collaboration across the Group.

PEOPLE & TRANSFORMATION

As it becomes a global tech company, the Volkswagen Group will see the biggest transformation of its workforce in its corporate history. To ensure the Group remains competitive in future, we need to attract top talent and support existing employees by providing extensive training where required. Our aim is to retain staff for the long term. It is therefore fundamental that we address the changing needs of our employees and offer them an outstanding employee experience. To achieve our Group’s ambitious objectives, we must also create and promote an environment for productive teams, resulting in a strong, sustainable and socially responsible corporate culture that fosters a sense of belonging and loyalty to the Company. A further focus is on aligning the Company with society and the environment.

FINANCING THE TRANSFORMATION

The transformation being driven by digitalization and electrification will require extensive investment. To meet this need for financing, the “Financing the Transformation” base initiative aims to leverage even more Group-wide synergies across all functional areas along the value chain, focusing on costs and efficiency. The Group has therefore set itself the objective of lasting improvements to its fixed-cost structure, plant productivity, procurement costs, distribution expenses and working capital management.