Accelerate NEW AUTO's strategic transformation, VW plans to increase sales by 5%-10% this year

Since the launch of the NEW AUTO strategy in July last year, the Volkswagen Group has embarked on a strategic transformation from a car manufacturer to a mobility service provider. The Volkswagen Group held its 2022 annual online media conference in Wolfsburg to showcase its 2021 financial report and the latest progress of the NEW AUTO strategy.

Volkswagen Group CEO Herbert Diess

2021 is a key point for the Volkswagen Group to usher in a business turning point in important global markets, and a series of issues such as how to promote the electric mobility strategy, strengthen software development capabilities, and improve production efficiency need to be solved urgently. What key information has the Volkswagen Group revealed at the key node of transformation this time, and what kind of plans do it have for the future? Next, we will sort out the core content of this conference in detail:

2021 annual sales profit of 20 billion euros

Faced with the large environmental impact of the global chip supply shortage over the past year, Mr. Arno Antlitz, Chief Financial Officer of the Volkswagen Group, said: "In the past two years, we have learned how to better respond to and mitigate the impact of the crisis on the company. ”

Arno Antlitz, Chief Financial Officer of the Volkswagen Group

We can clearly see from the financial report data released by Mr. Arno Antlitz that the Volkswagen Group sold 8.6 million vehicles in fiscal 2021, down 6.3% year-on-year, and the overall sales volume decreased by about 2.4 million units compared to the 2019 fiscal year.

However, thanks to its rich product lineup and the increase in the electrification market, the Volkswagen Group achieved sales revenue growth of 12.3% year-on-year to EUR 250.2 billion. Operating profit, excluding expenditure on special projects, amounted to EUR 20 billion, up significantly from EUR 10.6 billion in fiscal 2020.

From the perspective of specific brands, the Volkswagen brand achieved a profit margin of 3.3% in 2021, and the Skoda brand achieved a profit return of 6.1%. In terms of luxury brands, Audi, Bentley and Porsche achieved sales returns of 13.5%, 13.7% and 16.5% respectively. Overall, with the exception of Seat, each Volkswagen sub-brand achieved varying degrees of profitability in 2021.

At the same time, Mr. Arno Antlitz also said: "We remain committed to investing in the future and accelerating our transformation into a sustainable provider of software-driven mobility services. To this end, the Volkswagen Group has increased its investment in software development and autonomous driving technology. R&D costs in the automotive business increased by 12.2% year-on-year to EUR 15.6 billion, and the R&D expenditure ratio remained at 7.6%, which also helped NEW AUTO transform its strategy and provided sufficient R&D and technical support.

The Chinese market continues to lead, and the market situation in the United States is getting better

After reading the overall financial report data, let's take a look at the performance of the Volkswagen Group in the global regional market. The first is Volkswagen's most important growth market in the world – China. Despite the severe shortage of chips, the Volkswagen Group's domestic business has maintained a good profit margin, with a market share of 16% in China. Among them, the Volkswagen brand occupies 11% of the market share, and Porsche, Bentley and Lamborghini have also created new sales records.

It is worth noting that in 2021, the Volkswagen Group delivered a total of 92,700 electric vehicles, more than 4 times the sales volume in 2020, maintaining a fairly high incremental level. In 2022, the Volkswagen Group will promote its electric vehicle strategy in the Chinese market as planned, with the goal of doubling the sales of pure electric vehicles.

Then take a look at the performance of the American market, in north America Volkswagen Group through the popularity of SUV products, in Canada, the United States and Mexico three markets to restore profitability. The five new SUV models, including the all-electric ID.4, all performed well in the market, accounting for more than 75% of the Group's total sales in the U.S. market. In addition, the volkswagen ID.BUZZ just released will also become a new force for volkswagen in the North American market.

In South America, the Volkswagen Group also reversed the previous sales decline, and laid a good foundation for profitability and positive cash flow through the continuous launch of Taos, Nivus and other models.

Finally, returning to the European market, it can be said that the Volkswagen Group has a full weight in the field of electric vehicles in the European market. According to official Volkswagen Group data, it occupies 25% of the European electric vehicle market, with an average of 1 in 4 electric vehicles produced by the Volkswagen Group, and the Volkswagen Group has also exceeded the EU's vehicle carbon dioxide emission targets.

However, it is very interesting that the sales volume of the Porsche Taycan in Europe has surpassed the Porsche 911, which can also be seen that Porsche's electrification strategy has begun to bear fruit.

More importantly, Porsche has maintained relative independence within the Group and has provided comprehensive technical support to the Volkswagen Group. At this press conference, volkswagen group officially proposed Porsche's IPO plan, which is expected to be successfully completed in the fourth quarter as soon as possible, which is also one of the key tasks of volkswagen group.

Accelerate the transformation of NEW AUTO's strategy

The Volkswagen Group unveiled its NEW AUTO strategy in July last year to transform itself into a sustainable provider of software-driven mobility services by 2030. At the press conference, Volkswagen Group CEO Herbert Diess also shared the strategic progress of the past year.

In terms of mechatronics platform, although the MEB platform will be replaced by a new SSP platform around 2026, according to the Volkswagen Group, it has the ability to provide electric models corresponding to all its fuel vehicles, so there will be more ID. family models on the market in the future.

At this stage, the main MEB platform will also be officially opened to third parties, and the Volkswagen Group will further cooperate with Ford to produce Ford's second pure electric model based on the MEB platform. The model will be put into production at the Cologne plant in Germany, and production of the new car will increase to 1.2 million units over the next six years.

With regard to the new SSP platform, the Volkswagen Group will invest 2 billion euros to build a new process-optimized plant next to the main plant in Wolfsburg to produce the first model based on the SSP platform, the Trinity. The plant will adopt leading innovative production methods and achieve net zero CO2 emissions, and will compete with Tesla's Giga Berlin plant in the future.

In addition, the Volkswagen Group will invest 800 million euros to build a research and development center for the SSP platform to ensure that its first model, Trinity, has L4 level autonomous driving capabilities. In the future, the SSP platform will become the only pure electric vehicle production platform of the Volkswagen Group and realize autonomous driving functions for it.

Finally, in the field of batteries, according to Volkswagen's estimates, the proportion of pure electric vehicle sales this year will reach 7% to 8% of the total sales of volkswagen groups. Therefore, the Volkswagen Group will also increase investment in the battery field, in addition to the battery plants in Germany, Sweden and Spain, the Volkswagen Group also plans to build a fourth battery plant in Eastern Europe to meet the growing demand for supply.

The Volkswagen Group also plans to build 45,000 high-power charging terminals worldwide by 2025. At present, there are about 10,000 charging terminals in use. In 2021, Volkswagen will invest more than 1.7 billion euros in this area, including a stake in Guoxuan Hi-Tech from China.

Outlook for fiscal 2022: Vehicle deliveries expected to increase by 5% to 10% year-on-year

According to the information released by the Volkswagen Group, if the epidemic and the market environment are relatively stable, the Volkswagen Group expects that the vehicle delivery volume in 2022 will increase by 5% to 10% year-on-year.

At the same time, the Volkswagen Group expects sales revenue to increase by 8% to 13% year-on-year in 2022. In terms of operating profit, the Group's return on operating sales is expected to be between 7% and 8.5%. In terms of the chip supply issue that has attracted much attention, Volkswagen Group said that it will still be affected by the structural shortage of chips for some time to come, and compared with the first half of the year, chip supply is expected to improve in the second half of 2022.

In terms of financial expenses, in 2022, the R&D expenditure ratio of the automotive business is expected to be about 7%, and the ratio of capital expenditure to sales revenue is expected to be about 5.5%. Cash expenses arising from mergers and acquisitions will be the same as in the previous fiscal year, and the Group's net cash flow is expected to be in the same range as in the previous fiscal year.

It is worth mentioning that Mr. Arno Antlitz also stressed in the earnings release that Volkswagen paid 800 million euros in 2021 due to the diesel engine emissions events that occurred in the past, and it is expected that the event will also lead to a further increase in cash expenditure in 2022.

Overall, in addition to the global epidemic and the follow-up impact of the emission gate, the actual business performance of the Volkswagen Group will also be affected by the European situation on the global economy and the Group's supply chain, and the overall situation is full of uncertainty.

However, as Herbert Diess, CEO of Volkswagen Group, puts it: "We will continue to focus on the implementation of the NEW AUTO strategy towards a future of zero emissions and autonomous driving." "It is certain that in the future, Volkswagen will continue to promote the NEW AUTO strategy and further deepen its electrification and intelligent transformation process."