Volkswagen plans to become global leader in new energy vehicle market

Volkswagen AG is accelerating its transformation into e-mobility and connectivity, and it is convinced that economies of scale are a crucial factor to its success, as was proved in the age of gasoline vehicles.

"Electrification and digitalization are changing the vehicle faster and more radically than ever before. Economies of scale are absolutely critical for both issues," said CEO Herbert Diess.

Volkswagen kicked off its e-mobility campaign years ago, and now it has made clear it intends to become the leader of the global new energy vehicle market by 2025. The target is being financed by up to 46 billion euros ($54.6 billion) in investment.

By 2030, its share of electric vehicles in Europe will rise to 60 percent. In China, sales of electric vehicles will reach at least 1 million by 2025.It aims for a roughly 20 percent share of the country's electric vehicle market in the long run in China.

The goal is based on a new platform roadmap unveiled last week, which consists of hardware, software, batteries and charging, as well as mobility services, aiming to reduce complexity, leverage economies of scale and synergies between brands.

Diess said: "Volkswagen will also be the platform champion in the new world of mobility. Our roadmap clearly sets out how this will be achieved, allowing us to accelerate our transformation into a software-driven mobility group."

Among other things, the carmaker is building three platforms for the electrification age. Models from the first one, the MEB, have already rolled off the assembly lines in major markets including China.

Stephan Woellenstein, CEO of Volkswagen Group China, said two MEB plants have started operation and a third one is slated to produce vehicles from 2023.

In the country, which is the group's largest market worldwide, it has started deliveries of the ID.4 series SUVs, which are built on the platform, and the ID.6 is scheduled to be unveiled later this year.

Globally, 27 MEB-based models under different brands of the group will be offered by the end of 2022.

The second platform, called PPE, is co-developed by the group's subsidiaries Porsche and Audi. It is to be put in use from 2022.

Audi has formed a new joint venture with FAW, and the two are building a plant featuring this platform. The first China-made PPE model will roll off the line in 2024.

By around 2025, the group will kick off research and development on the next generation of all-electric, fully digital and highly scalable vehicle platforms, on which models of all brands and segments can then be built.

Volkswagen is speeding up efforts in terms of connectivity and software, aiming to achieve synergy across all brands.

In the coming years, the in-house share of car software development is set to rise from the current 10 percent to 60 percent, according to the carmaker.

Diess said the auto industry, as it becomes smart and electric, will be more dependent on scale than today.

"We are investing 2 billion euros per year in software development. If all of our cars, around 10 million, are using the software, that makes sense. That will be an advantage over competitors who sell a million cars," he said.

Volkswagen has also announced a unified battery cell plan. Batteries remain the most expensive part of electric vehicles.

According to the plan, the unified cell is to be installed in around 80 percent of all the group's electric vehicles across brands by 2030.

This will enable the group to reduce the cost of battery cells by up to 50 percent in the entry-level segment and by up to 30 percent in the volume segment.

To ensure that demand for battery cells can be met, Volkswagen and its partners plan to build six cell factories with a total capacity of 240 gigawatt hours in Europe by 2030.

Woellenstein said the company is in discussion with Chinese battery makers including Gotion about the cell.

It is also accelerating efforts to build public fast-charging networks in Europe, China and the United States. In China, at least 17,000 fast-charging points will be built by 2025.

"Our platform roadmap will put us in an even better position to tap the full potential of our group alliance," Diess said.

"By pooling the strengths of our strong brands, we will thus be able to scale up our future technologies even faster and maximize the number of people benefiting from them."

Volkswagen's electric offensive is already working. Last year, the group more than tripled its sales of all-electric vehicles to around 230,000.

New energy vehicles are estimated to reach 50 percent by 2035 in China, when the overall auto market is expected to total 30 million, according to experts.

"If we talk about a 20 percent market share, that is 3 million new energy vehicles," Woellenstein said.

He is confident about the increasingly intensified competition. "Which carmaker has the ability and capacity to build 3 million electrified cars in a single market? I am not going to mention the name, but you know what I am talking about."