VW wants to earn from software in the future, no longer from car sales

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Brand boss Brandstatter: "We will change VW more than ever before."

VW wants to earn from software in the future, no longer from car sales-wants

Volkswagen wants to transform itself from a car manufacturer to a "software-oriented mobility provider". With the Accelerate strategy now presented, the company is preparing for profound changes in the automotive industry, according to VW.

You can watch the press conference (in German) in the six-minute video above. In it, VW brand boss Ralf Brandstatter gives (with a little cocky gesture and a little CO2 blah) a good overview of what VW is up to.

After the diesel scandal, the brand decided – and more clearly than the competition – to turn to electromobility in 2016. VW is stepping up the gas again: So far, an electric car share of 35 percent in Europe was planned for 2030. Now this share has been doubled to 70 percent. That is a word. For China and the USA, VW expects a quota of 50 percent.

"We will change Volkswagen more than ever before in the years to come." (Ralf Brandstatter)

But that’s not all. Now the company also wants to tackle the future issue of software in vehicles. Because: "The real game changer is digitization," said Brandstatter at the event. "While competitors are still in the middle of the electrical transformation, we are taking big steps towards digital transformation." Big words, but what exactly does VW have in mind??

  • The first step is not yet a big one: From summer ID.3 and ID.4 will receive over-the-air updates (OTA) every 12 weeks. Other manufacturers also have OTA updates, especially Tesla, but also Porsche, Ford, Volvo, Jeep and Jaguar Land Rover, for example.
  • A second novelty is that VW apparently wants to introduce its own cloud. In the future, VW vehicles will also be able to continuously exchange data – including on traffic jams and accidents. In two years’ time, in 2023, VW "will be able to fall back on a fully networked fleet of over 500,000 vehicles," said Brandstatter. The feedback from the drivers of these cars should apparently lead to OTA updates again.
  • A third point is the "data-based business models", which means that VW wants to earn money from software updates in the future.
  • Fourth, VW wants autonomous driving wants to "make it tangible for many people" by 2030.

In addition, Brandstatter speaks about the Scalable Systems Platform, a new construction kit for "flat vehicles", which is supposed to inherit the MEB (as we suspect). The video shows a first X-ray image of it, which has a silhouette similar to the ID.3. That fits with the expression "flat vehicles", which excludes SUVs and possibly suggests electric cars that are slightly lower than the ID.3. Unlike the ID.3, the charging port seems to be at the back here (video at 3:50).

VW will invest 16 billion euros in electromobility, hybridization and digitization over the next five years. The brand is aiming for a profit of 6 percent by 2023.

Business model 2.0: the car as a software product

VW strives to "further develop the automobile into a software-based product". The Wolfsburg-based company has cars in mind that are heavily standardized in terms of hardware. So there shouldn’t be too many variants anymore. The various engines of the Porsche Taycan are already all-wheel drive today identical in terms of hardware – it is the software that provides different services.

The same principle has been common practice with combustion engines for years. For example, the Golf 1.0 TSI with 90 and the 110 PS differ only in the software. In the future, the additional power could also come into the car via OTA update, apparently VW’s vision. It is unlikely that Brandstatter also has combustion engines in mind, after all, VW is concerned with electric cars.

The engine power is just one example anyway. Infotainment functions, assistance systems and autonomous driving skills could also be activated at a later date. Tesla has been doing this for years: In January 2020, an expert counted over 120 OTA updates within two years and recently there was even an update with fart sounds for the horn …

With the OTA updates (or upgrades), according to VW, the "barriers to entry into individual mobility" should also drop. Because the model you bought will probably still be quite cheap; you only pay properly for the updates. The company wants to "generate additional revenue in the usage phase – for charging and energy services, for software-based functions that the customer can book as required, or for automated driving."

VW wants to earn from software in the future, no longer from car sales-longer

Future generations of VW vehicles will then be produced in far fewer hardware variants than before, because the individual configuration will not be determined until later. The car has almost everything on board when it is purchased, and the customer can later book the desired functions.

"The profits come from software applications, not the sale of cars."

In future, VW will focus on software: the car will become a "software-based product". Or as Wirtschaftswoche puts it: "After switching to electric cars, Volkswagen now wants to turn its entire business model upside down: the profits bring software applications, not the sale of cars."

More about VW’s Accelerate strategy: VW wants to earn from software in the future, no longer from car sales-earn Project Trinity: Sketch of the electric sedan from VW to be launched in 2026

VW wants to earn from software in the future, no longer from car sales-wants VW: Electric car share in Europe should increase to 70 percent

Everything that Volkswagen has planned for the future will flow into one vehicle for the first time in 2026: the Trinity project. At market launch, the car should enable automated driving at level 2+, but then in perspective, level 4 – possibly via an OTA update.

"Volkswagen will change fundamentally. We will not only stand for climate-friendly e-mobility, but above all for fascinating digital customer experiences, for new business models and autonomous driving for many. In the past few years we have developed a strong starting point . With Accelerate, we are now giving digitization a further boost. " (Ralf Brandstatter)

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