Volkswagen will atone for its unethical behavior in the Diesalgate scandal by focusing its efforts into electric vehicles.
The company is undergoing a thorough transformation process and electric vehicles are only part of the broader picture. Volkswagen also intends to tap into the car-sharing market to ensure a higher level of transparency in its management and, last but not least, to boost profits.
CEO Matthias Mueller affirms that his company aims to deliver at least 30 electric-powered vehicles by 2025. An internal estimation puts Volkswagen's EV sales somewhere between 2 to 3 million units per year.
One of the key elements in supporting this challenging objective is to develop hefty battery technology for the upcoming EVs. This is because battery range is one crucial criterion convincing people (not) to buy an electric vehicle.
Volkswagen also plans to aim its resources towards digital mobility, meaning the company could surprise its rivals with launching a ride-sharing or car-sharing program.
The carmaker is in a tight spot that forces it to rethink its profitability scheme. The majority of the company's profits in Q1 2016 came from its premium brands, Audi and Porsche. This makes sense as luxury products usually come with higher profit margins than the average consumer vehicles. However, the main Volkswagen brand lost terrain after the Dieselgate, and this shows in the company's earnings.
Mueller states that the new strategy should yield an increased operating profit margin, going from today's 6 percent to 7 to 8 percent by 2025.
One reason for the high costs of Volkswagen is its powerful corpus of employee representatives. This makes it very difficult for the company to prioritize profit by axing jobs or outsourcing work. The automaker has about 610,000 employees in its ranks. In comparison, Toyota counts 344,000 employees. Even with such a workforce discrepancy, the Japanese manufacturer managed to outsell the German manufacturer last year.
"Our most important currency is trust," Mueller points out.
He accepts the fact that the company's respectability took a hit due to the emissions scandal.
Volkswagen lost a part of its market share as evidence surfaced that the company tweaked the car emissions goals. The Dieselgate scandal unveiled that the carmaker met emissions tests by making use of engine control software, which started emission controls when the car was on a test stand but switched it off in standard driving.
The company took a whopping $18.1 billion from last year's profits and invested it into covering the costs of recalls and fixes. Volkswagen even considered buying back the approximately 500,000 affected cars.
Mueller notes that internal combustion engines remain an important part of the global car manufacturer, but Volkswagen is committed to developing and selling electric vehicles. This would not only help win a slice of the consumer sector, but fall in favor with regulators that demand less and less emissions of carbon dioxide in new cars.
The state secretary of Germany's Ministry of Economy and Energy, Rainer Baake, fixed a timeline for the new standards of pollution. He affirms that by 2030, every new car purchased in Germany should have zero emission levels.
Until the price of gas goes up again or pollution policy makers set their minds to trim the number of internal combustion engines, the electric vehicle market will remain thin.
