The "change" of multinational car companies: splitting into momentum and preparing for electrification

In the wave of the new four modernizations, multinational car companies are undergoing a major change. The start of the split has become an important step for multinational car companies to move towards full electric power.

Following Daimler's lead, the Volkswagen Group's spin-off plans are already at the forefront. Recently, volkswagen group has publicly stated that it is evaluating the feasibility of Porsche's IPO, and volkswagen group and porsche holding board have reached a framework agreement, which clearly ensures that porsche will be listed independently. According to industry analysts, the current market value of Volkswagen Group is about 112 billion euros, if Porsche can achieve independent listing, Porsche's valuation may be between 60 billion euros and 85 billion euros, or it will become the largest IPO in European history, close to rebuilding a Volkswagen group.

Ford Motor followed, and on March 2, Ford Motor announced that it would operate the electric vehicle and fuel vehicle business independently, with Ford Blue running the fuel vehicle business and Ford Model e operating the electric vehicle business. In addition, Ford has established Ford Pro, which is responsible for commercial vehicle and related service solutions, and three new companies are expected to operate independently and self-financing by 2023.

Similar to ford's split, Renault May also split its electric vehicle business and internal combustion engine business into two "separate entities", according to Renault Group. In the eyes of Luca de Meo, CEO of Renault Group, this is part of Renault's revival plan.

Auto analyst Zhang Xiang told the China Business Daily reporter that the multinational car company split its independent brands in essence to obtain more financing, in order to accelerate and support the development of their own electric and intelligent new business, so that they can also obtain asset appreciation.

Liu Shengbo, an expert in investment and financing in the automobile industry, told reporters that the development of the automotive industry has its own laws. The separation of the automotive division is the trend of the future, and free competition is more conducive to improving the overall competitiveness of the group, while also expanding revenue. And independent listing means independent development, there will be more possibilities.

Car companies split into a tide

In February, Daimler AG officially changed its name to Mercedes-Benz Group AG. It is understood that this name change is the third name change in Daimler's history, which means that this is a major change in daimler. Daimler AG announced that in order to unlock its full potential in the field of electrification and intelligence, the company underwent a structural transformation, splitting Daimler's truck business and passenger car business into two separate companies. The renamed Mercedes-Benz Group will focus on the automotive and van sectors and focus on the transition to electrification, while Daimler Trucks will focus on the development of heavy trucks.

Immediately after Daimler, the Volkswagen Group also made a move. The Volkswagen Group has announced the independent listing of Porsche twice in a week, and the long-rumored Porsche IPO has finally made substantial progress.

Volkswagen Group issued a statement saying that Volkswagen and Porsche Automotive Holdings have reached a framework agreement to ensure that The Porsche Company may have an independent listing as early as the fourth quarter of 2022, but ultimately needs to be signed by the boards of directors of Volkswagen and Porsche before it can continue to advance. According to the initial plan disclosed by volkswagen group at present, Porsche's share capital will be divided into 50% preferred shares and 50% ordinary shares, and up to 25% preferred shares will be placed on the market at the time of the initial public offering. The Volkswagen Group will continue to hold a majority stake in Porsche AG.

Ford, which had previously denied the split, also officially announced on March 2 that it would launch a new change.

In Ford's planning, Ford Blue, as a company operating the fuel vehicle business, its main responsibility is to make Ford's existing chassis bigger and stronger, and become the current source of ford profitability, providing ford with vehicle hardware engineering and manufacturing support. Ford Model e, as an electric vehicle company, is the core of Ford's future-oriented business growth, responsible for the development of software, intelligent networking technology and services for Ford's companies.

Ford Ceo Jim Farley said Ford's expectation is to not only allow the Ford Model e to have the efficiency and speed of a start-up, innovate without being bound by rules, but also allow Ford Blue to continue to play to The advantages of Ford's accumulated experience and production scale in the industry.

Ford's series of senior management team appointments also reflect ford's emphasis on this change. Jim Farley will personally serve as president of Ford Model e. Doug Field, a former executive on Tesla and Apple's car-making teams, has been named Chief Electric Vehicle and Digital Products Officer at Ford Model e, with overall responsibility for product development. Marin Gjaja will serve as Chief Account Officer for Ford Model e, overseeing product launches, customer experiences and new business initiatives. Kumar Galhotra, President of Ford's Americas and International Markets Group, serves as President of Ford Blue.

Coincidentally, The Renault Group is also working on plans to split. Luca de Meo recently said that Renault may split its electric vehicle business and internal combustion engine business into two "separate entities". The electric vehicle business may be concentrated in France, while the traditional fuel business and hybrid business may be arranged in other countries.

Luca de Meo said, "We are currently looking at how to proceed with the program. We have already begun to prepare for a full transition to electric vehicles in Europe by 2030. If the popularity of electric vehicles is slower than expected, Renault also has a plan B related to hybrid vehicles."

Preparing "ammunition" for the electric strategy

Behind the launch of this change is the urgent need for multinational car companies to quickly realize the electric digital strategy.

Jim Farley said publicly on Feb. 23: "We know the competitors are NIO and Tesla, and we have to beat them." Previously, he had mentioned Tesla several times as one of Ford's biggest competitors.

This is actually the voice of many traditional car companies. In the eyes of investors, Tesla's success is not only the launch of several electric vehicles, its emergence is like apple in the mobile phone industry when it subverted Motorola, Tesla is gradually shaking the leading position of old car companies such as Toyota and Volkswagen.

Zhang Xiang told reporters that the current automotive industry is undergoing drastic changes, traditional fuel vehicle companies and new energy vehicle companies in the capital market valuation difference is very large, such as Tesla these new energy vehicle companies sales although only a fraction of the traditional car companies, but new energy vehicles represent the future, and these new energy vehicle companies are indeed in the forefront of intelligence, so their valuation is far more than the traditional car companies. Under this circumstance, the traditional car company's business split is more conducive to financing and accelerating the development of its new business. Secondly, for brands after independence, they can also operate better.

It is understood that according to the estimates of major European investment banks, volkswagen group through Porsche IPO is enough to withdraw 15 billion to 25 billion euros of funds, even if the special dividend is excluded, Volkswagen group can still get 7.5 billion to 12 billion euros of funds. It is worth noting that the Volkswagen Group is currently in the critical stage of full electrification, with plans to invest 35 billion euros in electrification and 27 billion euros in digitalization by 2025. Some insiders pointed out that after the independent listing of Porsche, the Volkswagen Group may be able to realize the Porsche stock for investment in electrification and other fields.

In fact, the development of electrification is inseparable from huge expenditures. Ford motor vehicles said that in 2022, Ford's electric vehicle business will reach $5 billion, an increase of 200% compared to 2021. In this case, Ford needs more changes. Jim Farley said, "Ford has too many employees, and at the same time, we have a certain waste of resources in the internal combustion engine business, so there is still room for cutting the cost of the fuel business." In addition, Ford needs to introduce more new-age talents, including talent reserves in the fields of electrical architecture, digital services and autonomous driving, to improve the development process and profit margins of the electric vehicle business. ”

Jim Farley also said that at present, most automakers are accustomed to incorporating financial data from emerging businesses such as electrification into overall statements, which makes key data difficult to track and is not conducive to business reflection and subsequent accountability. After that, Ford Motor will track the financial statements of Ford Pro, Ford Blue, and Ford Model E, respectively, and when operated independently, these statements will directly reflect each company's revenue and expenses. At the same time, Ford motor will take this opportunity to carry out major management reforms for dealers, including the development of a new set of standards for selling electric vehicles, including no backlog of inventory, national price uniformity, and flat management of store operations.

After self-transformation, Ford believes that it will have better financial data. Ford expects savings of up to $3 billion as electric vehicle sales continue to rise and costs decline, as well as significantly lower structural costs for fuel vehicle products, and that the company expects to achieve an adjusted EBIT margin of 10 percent by 2026.

Daimler's split logic is similar. Industry insiders pointed out that for Daimler, the speed of promotion of new energy technology and driverless technology in the two business units of passenger cars and commercial vehicles is different. Splitting the commercial vehicle sector separately can allow the two major business groups to obtain more reasonable valuations. On the surface, Daimler split the commercial vehicle business in order to seek its independent development and take the opportunity to further expand its territory; but in essence, Daimler's move is also to raise more funds for the development of the new four modernization technologies of the increasingly large passenger car business.