Group Management Report

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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 the Development division were reorganized in 2020 in order to coordinate module development even more efficiently and leverage synergies in module variance, components, parts and processes.

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 wish 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 an organizational structure based on product lines, thus strengthening their responsibility for the success of vehicle projects, improving project work across the divisions, 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 new strategy NEW AUTO is to transform our core business activities and to expand the 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 our 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 motto “Mobility for generations to come”. Technologies and activities that are ready for pre-development are regularly transferred from Volkswagen Group Innovation to our Group brands to ensure that the areas of digitalization, sustainability and e-mobility receive continuous support in 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 formed an alliance with Ford Motor Company with the intention of working together on 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. Among other things, 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 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 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. To this end, we completed a transaction to cooperate in the development of autonomous driving with Argo AI and Ford at the start of June 2020. As part of this transaction, the former Volkswagen Group company AID was incorporated into Argo AI. In addition, Ford will use the Modular Electric Drive Toolkit (MEB) developed by Volkswagen for a zero-emissions volume model that is expected to 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.

We are accelerating our transformation into a mobility provider with a fully connected vehicle fleet and our “Volkswagen We” digital ecosystem through our strategic partnership with Microsoft. Together, we will press ahead with software development for the automobile of tomorrow and new services for our customers, including cloud-based driver assistance systems and automated driving and parking functions, thus comprehensively strengthening and expanding our IT expertise and solutions.

We support the design of the framework conditions for the approval and introduction of our own self-driving system through active involvement in public projects. The experience we are gathering here benefits the Group brands and thus our customers.

Modular Electric Drive Toolkit (MEB)
The modular system is for the manufacturing of electric vehicles. The MEB establishes parameters for axles, drive systems, high-voltage batteries, wheelbases and weight ratios to ensure a vehicle optimally fulfills the requirements of e-mobility. The production of the first vehicles based on the MEB started into series production in 2020.