VW Accelerates Profit and Cost-Cutting Efforts

December 06, 2018 at 10:00 AM

Volkswagen AG's namesake brand aims to “significantly improve” its earnings in coming years through aggressive cost-cutting to help finance rising investments in emerging technologies.

The brand plans to invest about 9 billion ($10.2 billion) by 2023 on electrified vehicles and another 2 billion ($2.3 billion) by that time on automated, digital and shared vehicle technologies and services.

VW previously aimed to improve its profit margin from 4% to at least 6% by 2025. The revised plan calls for achieving the 6% target by 2022.

The brand expects by year-end to realize €2.2 billion of the €3 billion in cost savings it targets by 2020. VW now aims to cut another €3 billion by 2023 by reducing model variants, sharing parts across vehicles, lowering material costs and otherwise reducing production complexities. VW predicts that its modular MQB platform will carry 80% of the brand’s vehicles by 2020, compared with 60% this year.

In Europe, the marque plans next year to drop one-fourth of its engine and transmission variants. For example, future entry-level models will be sold with manual transmissions only and will no longer offer all-wheel-drive.

VW Group also believes it can boost productivity at its assembly plants 30% by 2025 by sharing the same production lines with multiple brands. There are no plans to layoff workers, according to company officials.

Last month, VW Group announced plans to invest nearly €44 billion ($50.2 billion) by 2023 across all its brands on electrification, autonomous driving, mobility services and the digitization of its vehicles and plants. The figure is 29% greater than the previous budget for the period.