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. Against this background, responsibilities in Technical Development were reorganized in 2020 in order to coordinate module development even more efficiently and leverage synergies in module variance, components, parts and processes. We 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 the 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 the model-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 mobility solutions business area at the same time. It is decisive to the success of this plan that we place our innovative strength on even broader foundations.

Within the Volkswagen Group, we combine technological innovation activities in the Volkswagen Group Innovation unit. At seven locations worldwide in the USA, Europe and Asia, employees are working on sustainable solutions for urban and interurban mobility systems in line with our strategic vision “Shaping mobility – for generations to come”. Technologies and activities from Volkswagen Group Innovation that are ready for pre-development are regularly transferred to our Group brands. This means that the areas of digitalization, sustainability and e-mobility receive continuous support through innovative projects. In this way, we are creating an agile innovation structure that allows us to initiate new milestone projects with innovative international partners, even at short notice.

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. This helps us to identify the regional needs of customers more precisely, to adjust our product range correspondingly and to establish competitive cost structures. In doing so, we rely to a greater extent than in the past on partnerships, acquisitions and venture-capital investments and 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 Ford Motor Company with the intention of working together on the development of vans and mid-sized pickups. At the beginning of June 2020, Ford Motor Company and Volkswagen AG signed additional contracts within their existing global alliance for light commercial vehicles, electrification and autonomous driving. The contracts serve as the foundation for a total of three vehicle projects. In addition to the existing collaboration on the mid-sized pickup, projects are underway for a city van and a one-tonne cargo van. In total, the three alliance projects amount to a volume of approximately 8 million vehicles over the entire model cycle. In addition, we are investing 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 to make fully automated driving possible, and thus to open up new opportunities, particularly for ride-sharing providers and delivery services in urban areas through the use of fully automated vehicles. At the start of June 2020, a transaction was completed with Argo AI and Ford on cooperation to develop autonomous driving. Subsequently, the Volkswagen Group company AID was incorporated into Argo AI. 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 from 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 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, thus comprehensively strengthening and expanding our IT expertise and solutions.

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. A 16 GWh battery cell factory is to be built in Salzgitter. Looking ahead, we are already preparing for the next generation: we intend to bring solid-state batteries to market readiness in collaboration with our partner QuantumScape.

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: by the end of the reporting year, 325 charging stations were already in operation. By the end of 2021, we plan to have 400 charging stations in place.

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.