Volkswagen is undergoing a significant transformation, placing software at the heart of its strategy to become a leader in sustainable mobility. Building upon the foundation laid by the TRANSFORM 2025+ strategy in 2016, the ACCELERATE program marks a pivotal shift for the automotive giant. This new initiative aims to redefine Volkswagen as the most desirable brand for sustainable transportation by focusing on three key value drivers: enhancing brand value, developing scalable platforms, and establishing a valuable enterprise. A central pillar of this accelerated transformation is the deep integration of software into every aspect of the vehicle and customer experience.
Software Integration: The New Core Competency for Volkswagen
Recognizing the increasing importance of software in modern vehicles, Volkswagen is making software integration a core competency. Leveraging its high production volumes, the company aims to achieve economies of scale in software development and deployment across the Volkswagen Group. This strategic move positions Volkswagen to control and innovate the digital aspects of its vehicles, from in-car systems to the broader digital customer journey.
Spearheading this software-centric approach is the development of a comprehensive, customer-focused digital ecosystem. The ID. Family of electric vehicles is at the forefront of this initiative, serving as a testbed and proving ground for Volkswagen’s software ambitions. To ensure vehicles remain cutting-edge and continuously improve, Volkswagen established the ID. Digital agile project unit. This unit is responsible for delivering “over-the-air” (OTA) software updates every 12 weeks, starting in the summer of 2021. These regular updates allow Volkswagen vehicles to evolve throughout their lifespan, gaining new features, performance enhancements, and bug fixes, effectively making each car a continuously improving digital product.
Volkswagen anticipates a fully networked fleet of over 500,000 vehicles on the roads within just two years. This vast network will provide invaluable real-world data and direct customer feedback, which will be directly channeled back into the development of new software functions and improvements. This closed-loop system of data collection, analysis, and software updates will enable Volkswagen to rapidly iterate and refine its software offerings, ensuring they meet the evolving needs and expectations of its customers.
Business Model 2.0: Unlocking New Revenue Streams with Software
By transforming the vehicle into a software-driven product, Volkswagen is paving the way for innovative, data-driven business models. These new models are designed to lower barriers to entry for individual mobility while simultaneously offering customers attractive and flexible service packages. Volkswagen’s vision extends beyond the traditional car sale, aiming to generate recurring revenue throughout the vehicle’s service life.
This revenue diversification strategy includes several key areas:
- Charging and Energy Services: As electric vehicle adoption accelerates, Volkswagen aims to capitalize on the growing demand for charging infrastructure and energy management solutions. Software will play a crucial role in optimizing charging experiences, managing energy flow, and potentially integrating vehicles into smart grids.
- Software-Based Functions on Demand (FoD): Future Volkswagen vehicles will be equipped with a comprehensive suite of hardware and software capabilities. Customers will have the flexibility to activate specific features and functionalities “on demand” through the vehicle’s digital ecosystem. This approach allows for personalized vehicle customization and the ability to access features only when needed, potentially reducing upfront costs and offering greater flexibility. Examples could include advanced driver-assistance systems, navigation features, or entertainment packages.
- Automated Driving: As autonomous driving technology matures, Volkswagen sees significant revenue potential in related software and services. This could encompass everything from autonomous driving features available for purchase or subscription to the operation of robotaxi fleets and other mobility services.
Furthermore, Volkswagen is simplifying its vehicle portfolio structure for future generations. Instead of offering numerous hardware configurations at the point of purchase, vehicles will be produced with a significantly reduced number of versions. The core hardware will be largely standardized, and individual customization will be achieved through software activation. This streamlined approach will drastically reduce production complexity, improve efficiency, and allow for greater manufacturing flexibility. Customers will then personalize their vehicles after purchase, adding desired functions via the in-car digital ecosystem, effectively tailoring the vehicle to their specific needs and preferences over time.
Profitability and Investment in the Digital Future
Volkswagen has committed approximately 16 billion euros in investments through 2025, specifically targeting future trends in e-mobility, hybridization, and digitalization. This substantial investment underscores the company’s commitment to its software-driven transformation. To ensure the financial sustainability of these ambitious plans, Volkswagen is aggressively pursuing efficiency improvements under the ACCELERATE program. The company aims to achieve a targeted operating margin of at least 6 percent by 2023 and maintain this level long-term.
Key strategies for enhancing profitability include:
- Fixed Cost Reduction: Volkswagen is targeting a 5 percent reduction in fixed costs by 2023, streamlining operations and improving overall efficiency.
- Factory Productivity Enhancement: The company aims to increase factory productivity by 5 percent per year, leveraging automation, optimized processes, and digital technologies to maximize output and minimize waste.
- Material Cost Optimization: Volkswagen is focused on reducing material costs by 7 percent through strategic sourcing, value engineering, and improved supply chain management.
- Regional Profitability: A key objective is to ensure all regions operate profitably in the long term. Significant progress has already been made in North and South America, with Volkswagen achieving profitability even with reduced sales volumes in these markets.
Accelerating the Electric Revolution and Software Innovation
Volkswagen is significantly accelerating its global electric vehicle (EV) campaign. By 2030, the brand aims for all-electric vehicles to constitute over 70 percent of its deliveries in Europe – doubling the previous target of 35 percent. In the United States and China, Volkswagen is targeting an EV share of over 50 percent within the same timeframe. To achieve these ambitious EV targets, Volkswagen is committed to launching at least one new battery-electric vehicle (BEV) model every year. The rollout began with the all-wheel-drive ID.4 GTX in the first half of 2021, followed by the sporty ID.5 in the second half of the year. The ID.6 X / CROZZ, a seven-seater electric SUV designed for the Chinese market, was launched in autumn. Furthermore, plans for an electric car positioned below the ID.3 have been accelerated, with a target launch date of 2025.
Software innovation is intrinsically linked to Volkswagen’s e-mobility strategy. The Modular Electric Drive Toolkit (MEB) platform, the foundation for Volkswagen’s current generation of EVs, will be continuously optimized through software updates. These updates will deliver improvements in key areas such as acceleration, charging capacity, and driving range. Looking ahead, Volkswagen is developing the Scalable Systems Platform (SSP), a high-performance, all-electric drive toolkit for flat vehicles. This next-generation platform, scheduled for deployment in 2026 with Volkswagen’s flagship project, Trinity, will further solidify Volkswagen’s position as a platform champion and drive even greater software integration and innovation.
While aggressively pursuing its electric future, Volkswagen acknowledges the continued role of combustion engines in the near term. The company is committed to further developing its combustion engine fleet in parallel with its e-mobility expansion. All core models, including the Golf, Tiguan, Passat, Tayron, and T-ROC, will receive successors. Ralf Brandstätter emphasized this dual-track approach: “We will still need combustion engines for a while, but they should be as efficient as possible, which is why the next generation of our core products – all of which are world models – will also be fitted with the latest generation of plug-in hybrid technology, with an electric range of up to 100 kilometers.” This commitment to plug-in hybrid technology demonstrates Volkswagen’s holistic approach to sustainable mobility, incorporating both electric and highly efficient combustion engine solutions, all underpinned by advanced software integration.
