Daily Management Review

Volkswagen places a premium on e-mobility


11/22/2016


German carmaker Volkswagen (VW) unveiled a new brand development strategy for a period until the end of 2025. The plan is designed to triple profitability of operations, and restore the market position, deteriorated as a result of "Dieselgate".



MADe at nl.wikipedia
MADe at nl.wikipedia
The new strategy includes active development of operations in the US and China, as well as putting production of electric vehicles on the center stage. The automaker aims to become the world leader in this area by 2025.

"We want to sell 1 million electric cars a year by 2025, and to become a leader in the field of e-mobility", - emphasized in the VW press release.

Electric vehicle operations will be financed by reducing expenditure on other areas. In particular, VW will curtail production of certain car models, which, in turn, will free up around EUR 2.5 billion, the company said. The automaker intends to actively develop operations in the United States, focusing on major markets of off-road vehicles and limousines.

Since 2020, the group plans to start selling new electric models in North America. The new strategy also implies a major investment in infrastructure for electric cars. Volkswagen intends to begin production of electric vehicles in North America in 2021.

VW also expects to strengthen its position in China, where the brand is already a leader. In particular, the company intends to actively expand and offer off-road electric vehicles in China. The carmaker’s representatives say the concern will benefit from potential growth in demand for economy class models.

In general, the new strategy will lead to a substantial increase in sales in the next 10 years, as well as increased profitability of the brand.

On the other hand, the automaker plans to invest 3.5 billion euros in modernization of production, and conduct "socially acceptable" job cuts within the same strategy until 2025.

The concern intends to cut 30 thousand employees worldwide, including 23,000 in Germany. Thanks to regime of economy and efficiency in all areas and at all production facilities in Germany, Volkswagen expects a positive annual effect starting from 2020.

Also, the group will incite revenues outside of Germany, which are expected to be around EUR 700 million per year. Total profit, according to the new strategy, should reach 3.7 billion euros in 2020.

Productivity at factories in Germany will increase by almost 25%, operating profit is expected to grow by 4% in 2020.

In the first 9 months of 2016, Volkswagen’s profit increased by 48.2% to 5.915 billion euros, compared to the same period last year. The auto giant’s revenue for January-September decreased by 0.2% to 159.932 billion euros. Operating profit for the period reached 8.159 billion euros, an increase of 2.5 times compared with a year ago.

Volkswagen’s sales for the first 9 months increased by 2.9% yoy to 7.653 million vehicles.

In the III quarter, the company made a profit of 2.337 billion euros after tax against a loss of EUR 1.67 billion a year earlier. The company's revenue increased by 1% to 51.997 billion euros. Operating profit in the reporting period amounted to 3.308 billion euros against a loss of EUR 3.48 billion a year earlier. Car sales totaled 2,454,000 units, down 4.4% compared to a year ago.

The company expects that by the end of 2016, car deliveries rise can be somehow compared to the previous year. Revenues are expected to remain at the last year's level.

source: marketwatch.com






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