Synergies and Alliances
Leveraging synergies increases efficiency
When developing vehicles, we cooperate closely with our brands to leverage synergies. The joint strategy of our development alliance involves, for example, making the Group more competitive and viable in the long term by deploying resources more effectively and efficiently in the research and development of new mobility-related technologies, products and services. In our Group-wide development alliance, the brands therefore not only work with each other, but also for each other on key technologies, forming cross-brand networks of expertise to address topics of importance for the future. For example, we have consolidated the Group’s activities in and responsibility for the development, procurement and quality assurance of all battery cells in a central Center of Excellence under the umbrella of the Volkswagen Passenger Cars brand. In the Center, a pilot line for cell production was put into operation in 2019 to build up expertise for the Group in the area of cell design but also throughout the entire value chain.
We also manage our modules centrally to reduce costs, capital expenditure and complexity. We are seeking to reduce expenditure in the modular toolkits, while at the same time facilitating widespread electrification and a focus on autonomous systems. We want to achieve this through a considerable reduction in complexity using streamlined platforms that synergize but do not overlap. To this end, the individual Group brands draw on the modular toolkits, thus creating synergies between the various models of a product line, as well as across product lines. By streamlining the toolkits, we are giving ourselves the financial leeway needed for developments in the future trends of digitalization and autonomous driving. The high-volume passenger car brands have introduced a product line organization, thus strengthening their responsibility for the success of vehicle projects, improving project work across different cross-departmental areas, accelerating decision-making and intensifying the focus on project results.
We are also leveraging synergies by constantly sharing best practices, for instance in virtual development and testing. Last but not least, the centralized development and consolidation of our IT systems is also helping to strengthen cooperation across the brands, make development activities more comparable and reduce the Group’s IT costs.
Pooling strengths with strategic alliances
The aim of our future program TOGETHER 2025+ is to transform our core business and to establish a new mobility solutions business area at the same time. It is decisive to the success of this plan that we place our great innovative strength on even broader foundations.
Growth in the mobility sector is strongly defined through regional innovation activities. Volkswagen therefore concentrates its strategic venture capital activities and partnerships in the Group’s international innovation ecosystem and provides central support to the brands in the identification and implementation of technologies that will safeguard our competitive position. This approach helps us to identify regional customer needs more precisely, to adjust our product range accordingly and to establish competitive cost structures. We therefore rely to a greater extent than in the past on partnerships, acquisitions and venture capital investments. We manage investment selection centrally so as to generate maximum value for the Group and its brands. It is against this backdrop that we have formed an alliance with the Ford Motor Company. This involves an intended collaboration regarding the development of vans and mid-sized pickups. In addition, we plan to invest with Ford in Argo AI, a company that is working on the development of a system for autonomous driving. This alliance allows both car companies to integrate Argo AI’s self-driving system into their own models independently of each other. The system is supposed to make fully automated driving possible and to open up new opportunities, particularly for ride sharing providers and delivery services in urban areas, from the use of fully automated vehicles. In addition, Ford intends to use the Modular Electric Drive Toolkit (MEB) developed by Volkswagen for a zero-emissions volume model that should be offered in Europe starting in 2023. The aim of the cooperation is to place both Volkswagen and Ford in a position that enables them to improve their competitiveness, tailor their products to better meet the needs of customers worldwide and at the same time to leverage synergies related to cost and investment. The completion of the Argo transaction is subject to the approval of various official authorities and other conditions.
The strategic partnership with Microsoft enables us to accelerate our transformation into a mobility service provider with a fully connected vehicle fleet and our Volkswagen We digital ecosystem. Together, we will press ahead with software development for the automobile of tomorrow and new services for our customers. Our IT expertise and solutions will thereby be comprehensively strengthened and expanded.
Battery technology is to become a core competency of the Volkswagen Group. The battery accounts for 20% to 30% of the cost of materials in electric vehicles; in future, it will be one of the most important components when differentiating between products. We have already pooled our in-house expertise in battery cells in a Center of Excellence and at the same time intend to accelerate technological change and the development of expertise through intelligent partnerships. We anticipate that we will need a battery capacity of more than 150 GWh a year in the period to 2025 just to equip our own electric fleet with lithium-ion batteries. To cover this enormous demand, we have defined strategic battery cell suppliers for our most important markets and the first MEB models, and we aim to initiate further long-term strategic partnerships in China, Europe and the USA. The joint venture formed with Northvolt AB will build a 16 GWh battery cell factory in Salzgitter. Looking ahead, we are already preparing for the next generation: we intend to bring solid-state batteries to market readiness in partnership with other companies.
Our Group brands Volkswagen Passenger Cars, Audi and Porsche are involved in the pan-European High-Power Charging (HPC) joint venture IONITY, under which a comprehensive charging infrastructure is being built to safeguard long-distance mobility: after building 200 fast-charging stations in 2019 and with 65 more in construction, we plan to have around 380 of a total of 400 stations in operation along major transport arteries in Europe by the end of 2020.
We support the design of the framework conditions for the approval and introduction of our own self-driving system by our active involvement in public projects. The experience we are gathering here will benefit the Group brands and thus also our customers.