VW’s Transform 2025+ strategy: cull low-profit models, become global leader in EVs

Volkswagen is launching an aggressive new business strategy called Transform 2025+ in a bid to become a leader in e-mobility and clean up its image after Dieselgate.

The German car maker confirmed that it will cull low-volume, low-profit models, saving close to 2.5 billion euros (Rs 19,110 crore), to fund development of its future electric vehicle range. It refrained from revealing which models would be sacrificed, but recent cost-cutting measures, such as decreasing involvement in motorsport, showed how merciless this process can be.

The development of an e-mobility line-up forms the second of three phases for the Transform 2025+ strategy. The first, which will be complete in 2020, will involve VW restructuring and transforming its core business properties.

An early example of this restructuring includes the cutting of 30,000 jobs. Reported last week, it’s thought this money-saving method will play a big part in the brand’s financial recovery following the costly emissions scandal.

SUVs to lead growth, focus on EVs

Other goals in its transformation strategy include regaining its position as the top carmaker with SUVs leading the growth in the first stage of the program and electrification in the second stage. In fact the carmaker plans to be a global market leader in e-mobility and wants to sell a million electric cars per year by 2025, according to VW brand chief executive Herbert Diess.

"From 2020, we will be launching our major e-mobility offensive. As a volume manufacturer, we intend to play a key role in the breakthrough of the electric car. We are not aiming for niche products but for the heart of the automobile market. Our future electric cars will be the new trademark of Volkswagen," Diess said.

The intense focus on electrification is no surprise given the recent high profile emission scandal at Volkswagen. The company aims to rebuild itself with this new plan and electrification remains not just a viable business proposition but also redemption for its past transgressions.

Other areas of focus involve bringing about a “comprehensive organisational reform”. As reported recently, Volkswagen is reported to be cutting 30,000 jobs in the next three years after striking a deal with its labour unions. The cuts are the result of the growing cost of the Dieselgate emissions scandal, but they're also aimed at increasing VW’s focus on autonomous and electric cars, and according to reports about 9,000 jobs related to electrification are expected to be created.

The carmaker is also aiming at assuming a leading role in connectivity and is developing its own digital platform to offer owners a wide range of additional services. By 2025, it expects to have about 80 million active users throughout the world and it estimates that its sales revenue from services related to networked vehicles will reach about 1 billion euros (Rs 7,644 crore) per year by that time. 

The India angle

As part of its major global transformation strategy for 2025 and beyond, Volkswagen has also outlined plans to sharpen its focus around the entry-level car segment in India. “In other major markets such as India, South America and Russia, Volkswagen intends to develop the economy segment,” the company said in a release. Volkswagen says the economy segment comprises attractively priced entry-level vehicles and is highly relevant for multiple markets in Asia as well. Volkswagen has been working to increase its presence in the segment, which is evident in the Ameo, a compact sedan specifically made for India.