On March 14, Volkswagen held its annual media briefing. Among them, Volkswagen will invest 180 billion euros in the next five years for the group's overall intelligent electric vehicle transformation and continue to increase the number of two major markets in China and North America.
In order to reassure investors and users to maintain confidence in Volkswagen, Blume increased the proportion of its five-year budget for electrification and digital software from 56% to nearly 70%.
As we all know, the Volkswagen of the Diess era is very radical in the field of smart electric vehicles. At that time, the public who used Tesla as a benchmark was actually in pain. Due to the lack of self-research capabilities for many key core technologies, there were major delays in many projects, and Diess had to leave sadly. As the successor of Diess, the former Porsche CEO was initially regarded as a role in coordinating the relationship between Porsche and the Volkswagen Group and promoting the successful IPO of Porsche, but from the current point of view, Obum is not a transitioner.
Bright earnings support the electrification transition
In 2022, Volkswagen, like other car companies, has been greatly challenged in its supply chain, especially in the Chinese market, which is regarded as the pillar of Volkswagen, and it has been suppressed by the epidemic and supply chain. As a result, Volkswagen's global sales fell by 7%.
However, by shifting more resources to high-end models and premium brands, as well as increasing sales of higher-priced trucks and electric vehicles, the Volkswagen Group's full-year sales revenue increased by 11.6% to 279.2 billion euros, and the company's operating profit reached 22.5 billion euros, an increase of 2.5 billion euros compared to 2021. Return on operating sales increased from 8.0 percent to 8.1 percent and pre-tax profit of €22 billion increased by 9.5 percent year-on-year.
This series of beautiful data has laid a solid foundation for Volkswagen's future investment plan of up to 180 billion euros.
On the other hand, Volkswagen's Porsche brand completed a separate listing in 2022, which made the Volkswagen Group, as a major shareholder, also gain a lot.
As a traditional car company, whether it is the electrification transformation of the powertrain or the development of intelligent network technology, it needs to invest a lot of money. For a multinational car group like Volkswagen, only the continuous profitability of the fuel vehicle business can ensure that the company has enough resources to balance the needs of all parties and ultimately achieve group-level transformation.
In 2023, the supply chain bottlenecks of automakers will gradually improve, so the Volkswagen Group expects its total deliveries to increase by 14.97% to 9.5 million units. At the same time, the Group's sales revenue will increase by 10%~15% year-on-year, and the return on operating sales is expected to reach between 7.5% and 8.5%.
Batteries and software will remain the focus over the next five years
At the beginning of his tenure last year, Obermu proposed a "ten-point plan", which mainly includes planning cycle, products, Chinese market, North American business, CARIAD, new scalable system platform (SSP), battery and charging, mobility services, sustainability, and capital markets. Among them, battery and software are two important grippers.
In the field of batteries, Volkswagen will invest 15 billion euros in battery factories and battery raw materials in the next five years. Last year, Volkswagen officially announced that it would build six PowerCo battery factories in Europe, the first two in Salzgitter, Germany, and Valencia, Spain. Not long ago, Volkswagen also officially announced that it will build the first North American battery gigafactory in Canada. In the eyes of the public, whether it is battery raw materials or the supply of clean electricity, Canada is an ideal destination for building factories.
By 2029, as Volkswagen's electrification transition continues, the PowerCo battery business is expected to generate more than €20 billion in sales. This also meant that PowerCo had the capital and conditions to be listed separately.
In addition to the battery business, it is particularly worth mentioning that in the field of internal combustion engines, Volkswagen will continue to invest. Globally, the internal combustion engine business, or hybrid technology based on internal combustion engines, still has a place in many markets where charging infrastructure is not convenient. According to Volkswagen's plan, it will launch the next generation of engines that meet the more stringent Euro 7 emission regulations.
For the vast majority of traditional car companies, the fuel vehicle business can still provide the most stable financial support for their electrification transformation. In the larger environment, even if the European market is completely banned in 2035, in exchange for Germany's consent, the EU still opens a back door to engine technology based on renewable fuels. At Volkswagen, retrofitting existing combustion engines has been proven to be able to follow the relevant technical routes.
As one of the iconic achievements of the Diess era in power, CARIAD is facing a comprehensive adjustment. Under the influence of Tesla, Diess has always emphasized the importance of self-research. However, whether it is the delay in the delivery of the ID.3 listing or the delay in the E3 architecture 2.0, it has made the public realize that the self-research of the vehicle electrical architecture will face great challenges. Due to the weakness of CARIAD's self-developed system, the previous rumors of Porsche Macan EV, Audi Q6 e-tron, Artemis technology platform, etc. have been delayed, and Bentley's goal of electrification in 2030 is threatened, which has become the last straw that led to Diess stepping down. Therefore, before and after Obum came to power, CARIAD has begun to integrate outsourcing from all self-research, cooperation with other companies and even direct acquisition, to quickly fill the lack of capabilities of Volkswagen.
The importance of the Chinese market continues to increase
The importance of the Chinese market to the Volkswagen Group is self-evident. However, Volkswagen, which is regarded as a "divine car" by the Chinese people, has also begun to face increasing challenges in China.
In 2022, VW delivered 3.18 million units in China, down 4% y/y. In the sales ranking announced by the Passenger Association, BYD surpassed FAW-Volkswagen in one fell swoop, and SAIC Volkswagen was also surpassed by Changan Automobile, and its own brand car companies have comprehensively improved their product strength. In 2022, the ID. pure electric family delivered 143,100 units in China, a year-on-year increase of 102.9%. However, considering that BYD has sold more than 200,000 units a month in many months, as well as the strong performance in the domestic new energy vehicle field, it is difficult for Volkswagen to reproduce the glory of the era of fuel vehicles on the star of pure electric vehicles.
From the perspective of investment, Volkswagen has a relatively comprehensive layout in the domestic market. Leaving aside the two joint venture car companies of North and South Volkswagen, Volkswagen has controlled 75% of the equity of Jianghuai Volkswagen and has also become the major shareholder of battery company Guoxuan Hi-Tech. In the field of intelligence, Volkswagen established CARIAD China Software Company in China, and invested 2.4 billion euros in Horizon and established a joint venture with Horizon through CARIAD to enter the field of chip design. According to Oberme, the importance of the Chinese market to the public will continue to increase. Volkswagen will also continue to strengthen its competitiveness in the field of electric vehicles to expand its share in the domestic market. For Volkswagen, better results can only be achieved if the two markets of Europe and China can accelerate at the same time.
As Diess's successor, Obermu suspended several projects developed by Diess at the beginning of his tenure: the Trinity electric vehicle project based on the SSP platform, a dedicated factory dedicated to the production of Trinity, and ARGO AI, a joint venture with Ford.
Originally, the outside world seemed to have doubts about the transformation of Volkswagen's intelligent electric vehicles, but through this media conference, Volkswagen basically dispelled the doubts of all parties.
Compared with Diess, Obermu wants to be more radical, after all, the electric transformation is already the consensus of all parties in the world's major automobile markets. Of course, he also hopes to be more pragmatic, for a company like Volkswagen, a traditional car company, it is difficult to have strong software development capabilities overnight. To avoid the pit that his predecessor stepped on and seek to replicate the glory of Porsche on the larger platform of the Volkswagen Group, the burden on Obermu is not light.