Volkswagen's New Strategy: Software & Autonomous Driving

Volkswagen's Strategic Shift: Software, Mobility, and Batteries

To maintain a leading position in the automotive industry over the coming years, Volkswagen is significantly increasing its focus on software development, mobility as a service, and advancements in battery technology. This proactive approach anticipates the most substantial evolution in personal transportation since the original invention of the automobile.

A Comprehensive Transformation

During a strategy presentation on Tuesday, CEO Herbert Diess highlighted a complete overhaul of the company’s operations, encompassing both manufacturing processes and revenue generation models.

Historically, Volkswagen’s income has been largely dependent on sales of vehicles with internal combustion engines. However, CFO Arno Antlitz indicated that the remainder of this decade will see revenue streams diversify.

New Revenue Streams

Future income will be derived not only from electric vehicle sales, but also from software solutions, autonomous driving technologies, and even ridesharing services.

The company is actively investing in these areas, with plans for six battery Gigafactories across Europe.

Furthermore, an €800 million ($944 million) research and development facility dedicated to hardware platforms is being established in West Berlin.

Cariad: The Software Core

Volkswagen is also strengthening its in-house automotive software division, Cariad.

The company projects that Cariad could generate up to €1.2 trillion ($1.4 trillion) in revenue by 2030 through subscriptions and related sales.

Autonomous Driving Ambitions

Volkswagen has ambitious goals for autonomous driving. The company intends to capture a significant portion of the market currently held by ridesharing and car rental services.

An integrated AV platform is seen as the key to achieving this objective.

Executives showcased visualizations of a future where customers can summon a Volkswagen electric AV taxi or shuttle via an app, potentially without the need for a steering wheel or driver’s seat.

A Vision of Future Mobility

“Consider the possibility of your grandmother or an eight-year-old child being able to travel in a Volkswagen vehicle to visit each other at any time, independent of a parent being at the wheel,” Diess proposed.

“Our mobility applications will allow you to request an ID Buzz to transport you and your companions.”

Levels of Automation

Personal vehicles will be powered by Cariad, which Volkswagen anticipates will achieve “level 4 readiness” by 2025.

Shared mobility vehicles, such as shuttles or taxis, will be VW-owned and operated, utilizing technology developed by Argo AI. Volkswagen completed a $2.6 billion investment in the startup last June.

Financial Projections for MaaS

Volkswagen anticipates substantial returns on its investments in MaaS (Mobility as a Service).

The company forecasts annual revenues exceeding $70 billion in the five largest European markets by 2030, according to Christian Senger, CTO of Volkswagen Commercial Vehicles.

The autonomous rideshare ID Buzz, currently undergoing pilot testing in Munich, will be launched as a commercial service in Hamburg in 2025, followed by a rollout in the U.S.

Transition to Electric Vehicles

Aligned with these projections, the automaker expects BEV (Battery Electric Vehicle) sales to represent 25% of total sales by 2025 and 50% by 2030.

Margins for ICE (Internal Combustion Engine) vehicles are expected to face increasing pressure due to declining demand, stricter emissions regulations, and unfavorable tax policies.

Consequently, Volkswagen plans to reduce its number of ICE models in Europe by 60% by 2030.

Cost parity between ICE and BEV vehicles is projected to be achieved within two to three years, thanks to economies of scale and reduced factory costs, as stated by Antlitz.

Optimistic Outlook

Volkswagen expresses confidence in its future, having increased its profit target for 2025 to 8-9%, up from the previous target of 7-8%.

A Transformative Era

“By 2030, the world of mobility will experience the most significant transformation since the shift from horses to cars at the beginning of the 20th century,” Diess concluded.

“The future of automobiles, and of individual mobility, will be exceptionally promising.”