Massive Changes Coming to VW Group in Next Decade

An EV-only brand is being discussed, and only VW, Audi, and Porsche may emerge relatively unscathed.

While it's true that 2030 is more than a decade away, it's also only a decade away. And given the accelerated speed of change in the car industry, there are few stones that will be left unturned during the next eleven years. On the brink of a massive transformation process, the VW Group has announced that it will release 70 new EVs by 2028, up from the 50 originally announced. As a result, production of zero-emission vehicles is set to soar from 15 million to 22 million units, and by 2025, the group will have invested more than €30 billion ($33.6 billion) in electrification alone. By 2030, the EV penetration across all VW brands is scheduled to exceed 40 percent, and by 2050, VW wants to be a fully CO2-neutral carmaker both in terms of its products and the processes used to produce them. Big numbers, ambitious targets, radically advanced priorities—according to aides and advisors to CEO Herbert Diess, a bold new strategy will have to be implemented to make this game plan work.

The Background

In late March, the first details of Vision 2030 started filtering from the board level to selected senior managers. Apparently, the proposed rethink is based on four cornerstones: the restructuring of the global production network; the streamlining of key technologies; the focus on core brands; and the clear emphasis on EVs, autonomous driving, other forms of mobility, and digitalization. Not surprisingly, the unions have already started to fight this policy, which will entail substantial cost-cutting. After all, the VW Group is overstaffed, under-efficient, and desperately short of pragmatic forward thinkers. While electrical-architecture specialists, software specialists, and digital marketing experts are in short supply, VW's glut of mechanical engineers and assembly-line workers is about to evolve into a huge financial burden—especially when compared to efficient start-ups who, being devoid of inherited liabilities, are free to farm out almost the entire value-creation chain. Despite early efforts to mitigate uncontrolled mushrooming of componentry sets, products, and assembly networks, German media claim that VW's chairman has recently come under fire from three members of the supervisory board, namely Wolfgang Porsche, Hans Dieter Pötsch, and Stephan Weil.

"Complexity is the biggest thorn in the side of efficiency," says Herbert Diess. "One secret to success in the car business is total modularity and scalability." With the help of IT giants like Siemens, Microsoft, and Amazon, VW intends to maximize productivity and minimize job cuts. As part of a major streamlining effort which began earlier this year, the number of combustion-engine variations will be reduced by up to 60 percent depending on the brand, plug-in hybrids will be standardized in three performance classes, and all transmissions—bar the near-extinct manual—are being redesigned to accommodate electric motors. "In the long run, we want to scale back the portfolio of conventional models and concentrate instead on a fast-growing family of EVs," states the man in charge of it all. "With the ID model range, VW is about to demonstrate the benefits of fusing diversification and standardization."

The Platforms

In a first step, the group will work with three brand-new EV architectures: MEB (compact to mid-size, masterminded by VW), PPE (mid- to full-size, jointly developed by Audi and Porsche), and J1 (Porsche Taycan, Audi e-tron GT). The SPE architecture, the proposed electric sports-car platform to be defined by Porsche, is dead, and the electrified Boxster/Cayman (983, out by 2023) will instead use a converted mid-motor MMB structure. If the 911 ever goes fully electric, the T-shaped battery pack used by those cars would be rotated by 180 degrees in an adapted cradle. Still pending is the subcompact EV matrix destined to underpin Up!-sized cars, although whispers indicate such a platform may be conceived and built with a Chinese partner. While the MQB (Polo, Golf) and MEB families can happily live side by side, the future of the bigger MLB component set (Audi A4, A6) looks shaky. Comments Hans-Joachim Rothenpieler, Ingolstadt´s new CTO: "We need to find a sustainable solution for the indefinite transition period until EVs eventually take over." There is a good chance that the brand will campaign for its own modular convergence platform not unlike BMW's CLAR setup and the MX-2 layout developed by Mercedes. So much for streamlining.

The Brands

According to our source in the Wolfsburg control tower, only VW, Audi, and Porsche are likely to survive long-term in their current forms. While some or all of the remaining brands may eventually be merged, reinvented, or simply sold off, insiders insist there are also plans afoot to create one additional marque that would, like Tesla, sell exclusively EVs. Michael Mauer, who oversees the group's design strategy, was politely told to put an end to cookie-cutter lookalikes (think of the same-ish VW/Škoda/SEAT/Cupra crossovers) and instead push for more diverse visual brand identities. Ideally, his efforts would be backed up by a heavyweight board member in charge of sales and marketing—but this position is inexplicably empty on the group level. While Oliver Blume rules Sport & Luxury and Bram Schot controls Premium, Herbert Diess himself calls the shots at VW, which in turn oversees SEAT and Škoda.

That means, come 2030, Bugatti, Bentley, Lamborghini, Italdesign, and Ducati may no longer be part of the VW empire. Italdesign and Ducati are tipped to be spun off in the not too distant future, Bugatti is tipped to be gifted to Ferdinand Piëch, and while Lambo may get a second chance under the guidance of Audi or Porsche, Bentley's rope is said to be rather short. According to a senior strategist, the former Rolls-Royce affiliate combines all the wrong brand values with Ye Olde Worlde design and conventional engineering. "Why invest on a backward-looking enterprise when you can support a trendsetter? A proud history and excellent craftmanship alone don't cut it anymore." No official who desires to keep their head attached to their body will confirm this, but there exists a plan B for Bentley, and that is to keep putting makeup on the brand until a suitor, perhaps from China, steps forward and takes it away. Since neither PPE nor J1 are yet part of the Bentley DNA, the dowry might be heavy on glitz and light on substance, however.

Lamborghini belongs to Audi on paper, but the reality is Porsche is already pulling quite a few strings while Ingolstadt foots the bill. Even though the board's blessing for the new Aventador "is now only a formality" (says Bram Schot), "I am not prepared to let every sports car have its own bespoke drivetrain" (says Herbert Diess). Which is another way of saying that the main shareholders want to see a stable double-digit return on investment from the halo brands, or they may spin them off to an investor and throw in Ducati as a bonus. As we understand it, Herbert Diess—who isn't your typical car guy in terms of valuing histories—wouldn't have considered it sacrilege to revive the 5.0-liter flat-eight Porsche had in mind for its stillborn 960 Ferrari fighter, and then, had the business case worked, use it in the new Aventador. The current leadership prefers a trimmed lawn to a wildflower meadow, but rare and exotic species can only survive with plenty of passion in the equation.

Vision 2030 can still fork in several different directions. Since return on investment remains the undisputed top priority, volume and growth can afford to take a controlled hit here or there—but persistent underperformance will lead to uncertainty for the nice to have but by no means indispensable affiliates like Bentley and Lamborghini. Strangely enough, the different VW brands are plagued by different problems. Volkswagen, for example, faces massive software issues, unresolved issues with regard to advanced connectivity, teething troubles with its next-generation infotainment architecture, stillborn partnerships, and impromptu parts shortages. As a result, the launch of the super-important Golf MkVIII—which may not make it to America in its regular formwas pushed back to early 2020, while the ID hatchback, still plagued by thousands of electronic bugs as you read this, is now almost six months behind schedule.

The Plan for Volkswagen's Products

Here's what to expect in the 2020-2022 timeframe:

2020: Golf MkVIII, passenger T7, Caddy II, Arteon Shooting Brake (nice!), Up! facelift, ID hatchback, ID Crozz.

2021: Commercial T7; new Golf SportWagen/Variant, GTI, and R; ID Buzz, ID Roomzz, ID sedan, ID Buggy.

2022: Touran replacement (the Sharan and Golf Sportsvan will be phased out), Euro Passat replacement.

All ID versions are based on the MEB components set, which includes two wheelbase options and four equipment levels currently dubbed Pure, Range, Range S, and GTX. There are rear- and all-wheel-drive configurations, three battery sizes (60/80/111 kWh), and three different power levels (125/148/220 kW, which translate to 168/198/295 hp). VW is expected to roll out Phase II of the ID family starting in 2022. A source from design tells us that we'll see an ID roadster concept at the next Geneva show, and an electric pickup concept during Monterey Car Week in August. Late in the year, a five-door ID SUV inspired by the New Beetle may follow suit. Also under discussion are zero-emission reincarnations of the Karmann Ghia and the VW 181 Kübelwagen/The Thing, an electric four-door coupe, and a brawny production version of the ID R. Looking even deeper into the crystal ball, one can spot a full-size sedan badged as the ID8 or ID9. This late but environmentally friendly successor to the slow-selling Phaeton will use a stretched MEB platform and widened subframes for a stately stance and premium proportions. It won't use the PPE platform simply because of territorial issues—those bones weren't developed by VW proper.

A Standalone EV Brand?

Asked whether VW is considering launching a fully electric and mobility-focused brand aimed primarily at younger users living in urban areas, Herbert Diess nodded and said: "It would be a mistake not to address the increasingly volatile market with potentially game-changing new offerings. Trouble is, we already have a very full plate, and there is a limit to our spending power." The VW Group is currently worth between €75 and €80 billion ($84 to $89.5 billion), but Diess thinks he can more than double the value by taking bold decisions like shifting the emphasis from classic brands to new fully connected ventures. According to those in the know, the footprint of the proposed urban-vehicle architecture ranges from "a little shorter than the Up! to a little longer than the Polo."

It could allegedly spawn up to 10 different body styles, which would include vehicles designed to be taxis and shuttle vans as well as subcompact CUVs, SUVs, and hatchbacks. As soon as self-driving technology is safe and affordable, autonomous vehicles will become part of the EV family. The biggest challenge is to turn the theoretical urban brand into a solid business case, sources say. Although the city runabouts make do with smaller batteries and a range of no more than 100 miles, VW would need a low-cost production facility (most likely in China, India, or Russia), a strong cooperation partner, and a willing supplier base to achieve the target profit rate of six percent. As of now, this seems totally unrealistic in view of the fact that the brand´s car business is currently barely breaking even.

The internal slogan "power to the brands" wasn't all that believable even when the streets of Wolfsburg were still paved with gold. Today, concerted actions like pooling resources and making decisions from an elevated vantage point is absolutely essential for complex conglomerates such as the Volkswagen Group. But just as there is no board member in charge of sales and marketing, now that Ulrich Eichhorn has been sidelined there is no more top-ranking chief engineer to coordinate the R&D efforts of the group's brands either. While this arrangement is probably okay for VW and Porsche, Audi´s "Vorsprung durch Technik" claim has come under serious threat simply because key technologies are created elsewhere.

After all, Ingolstadt's future product program consists almost entirely of MEB- and PPE-based vehicles. The solution is to urgently accelerate cross-fertilization of ideas, components, and architectures. Here are some proposals for jointly developed EVs that are currently making the rounds:

Derivatives of the next Boxster/Cayman (983): Audi TTE coupe/roadster, Porsche Cayman/Boxster, Lamborghini Urraco.

Additional J1 derivatives for Audi by Porsche: 2+2 convertible/coupe, high-end CUV.

J1 derivative for Bentley by Porsche: Hyper-luxury five-door that combines a GT coupe with an SUV.

J1 derivative for Lamborghini by Porsche: Sporty, Espada-style 2+2 coupe.

Porsche/Lamborghini 1000kW/1500Nm (1341 hp/1106 lb-ft) hypercar: A world first for HP solid-state batteries.

Similar proliferation schemes have been mapped out for MEB- and PPE-derived products. While MEB involves VW, Audi, SEAT, and Škoda, PPE is reserved for the premium and sport/luxury divisions. "These days, risks and opportunities live next door to each other," says Diess. "Smart timing can make all the difference, especially as far as future EVs are concerned. We can offer the customer great products at competitive prices, but without a fully functioning infrastructure, the prettiest kite won't fly." If this is the case, early adopters could become the first to drop out, emphasizing the importance of a holistic strategy.

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