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Volkswagen, give up the first

Publish Date: 2022.04.11

  Reduce the lineup of more than 100 fuel vehicles by 60%;


  Don't care about sales volume and market share, but pay more attention to sales quality and profit margin...


  This is the latest strategy and thinking of Volkswagen revealed by Volkswagen Chief Financial Officer Arno Antlitz recently. As an international auto giant and once a global sales champion, it is so "crazy" to change, and in thinking The fundamental change on the top of the road reflects the compulsion behind the turn of the Volkswagen elephant.


  Anyone who knows it knows that those who have the ability to win the championship will not be so humble that the title and sales are not important. Since it is a new strategic trend of the Volkswagen Group, it will undoubtedly bring a series of new pattern changes and even chain reactions.


  In fact, foreign media also analyzed that Volkswagen's new strategy will be a sign of profound changes in the auto industry, because for decades, the auto industry has been trying to increase profits by selling more cars. Volkswagen, Toyota and other global auto giants, including Mercedes-Benz, BMW And other luxury car brands, they are also chasing after each other in the competition of global sales champions and market segments.


  The catch-up of sales volume is behind the scale. It was once regarded as the fundamental way for the development of the automobile industry, so there were mergers and acquisitions and reorganizations of various groups. However, under the spell of the sales ceiling, in the transformation of new energy, Under the ever-changing industry environment and market structure, will larger scale and system operation mean greater consumption, especially in the face of ever-shortening changes in the times, when the larger system is facing the inevitable transformation, Will it be more difficult.


  There is no doubt that this change in Volkswagen's strategy may push the Volkswagen Group to abandon the competition for the global car sales champion, and instead move towards a more focused group's financial and sustainable health. From quantity to quality, from sales competition to profit PK, in this brand-new era of automobiles, all rules and orders will be reshaped, and new models and civilizations will usher in a new situation.


  The Curse of the Giants


  For an automobile group, who is more important in terms of sales volume or revenue and profit?


  If the public in the past were to answer this question, they would definitely choose the former, which is also true.


  I still remember Volkswagen's former CEO Winterkorn said after taking office: "We will surpass Toyota to become the world's No. 1 car manufacturer within ten years." The title, at the time under his leadership, the Volkswagen Group had been focusing on sales growth. In pursuit of global dominance, Volkswagen has retained a lot of business in unprofitable North and South American markets, and has continued to roll out new models to those regions even as it suffered heavy losses.


  In 2014, the annual sales volume of Volkswagen Group reached 10.14 million vehicles, surpassing the level of 10 million vehicles for the first time; The result was two years ahead of schedule.


  However, the "emission gate" incident on the road to winning the championship is what Volkswagen is in the throat. In the end, Volkswagen had to face losses of more than 30 billion euros and lost at least two years of net profit. And the chain reaction brought about by the emission gate has also made the public almost peel off a layer of skin, so what if it stands on the top of the global sales? The pain of the masses is like drinking water, knowing whether it is cold or warm.


  In fact, the position of global sales champion is not so wonderful. In 2008, Toyota won the first place from GM. The next year, it encountered a "brake door" in the United States and almost died. Before the Lehman crisis, Toyota suffered a lesson from losses because of its over-fascination with business scale. It had to let Akio Toyoda understand that when the pursuit of numbers and scale is too much, the moment when the original intention is lost, the crisis will come.


  Regardless of whether the original intention is to build a good car or maximize profits, the facts show that Toyota's profit is indeed the highest in the global auto industry, and even under the same revenue, its profit is twice that of Volkswagen. As for sales, it's natural.


  If Toyota is just verbally stating that it does not care about the global sales champion, then GM is showing that they are not interested in the world's largest sales title with practical actions. In 2016, GM's sales exceeded 10 million for the first time, slightly less than Volkswagen and Toyota. It is not impossible to return to the top of the list with a little more effort.


  However, in 2017, they resolutely sold their European business to PSA, which suddenly lost millions of sales, and took the initiative to withdraw from the championship. There is no doubt that General Motors, an industry giant that has been the industry leader for 77 consecutive years, has put profitability in a more important position than sales after experiencing the test of life and death brought about by the 2008 financial crisis.


  Including the Renault-Nissan-Mitsubishi alliance, which defeated Volkswagen in 2017 and Toyota won the global sales championship, also because of some ethnic and interest entanglements, it has gradually moved to the point where it exists in name only. In addition, since 2020, under the influence of factors such as the epidemic, lack of cores, and strategies, the three major brands have been losing money. Coupled with the chain impact of lack of cores and the Russian-Ukrainian war in 2021, this alliance that once won the world's top sales , it is almost impossible to return to the glorious moment.


  In fact, all the cases tell us again that the hidden dangers brought by rapid expansion are like an opened Pandora's Box, releasing various disasters that no one can resist. If you ask the scale of sales volume or revenue and profit, who is more important? Volkswagen and its CEO Diess have chosen the latter without hesitation, especially in 2021, when Volkswagen feels the importance of profits.


  According to the 2021 annual report of the Volkswagen Group, although the sales volume was 600,000 less than the previous year, the operating profit increased to 20 billion euros, nearly doubling from the previous year. VW said the results were due to improved earnings quality by selling models with higher levels of configuration; and through planned chip allocation, we were able to ensure margin improvements despite declining sales.


  Perhaps Antlitz or Volkswagen's management Diess have found the true development direction and future of the company through the financial results and changes in the pattern over the past few years. Coupled with today's automotive world, it is really different. The various provocations of Tesla and new forces, and the rapid development of intelligent and electric vehicles have brought about changes and reshaping of the system. In the face of energy strategy and investment, Volkswagen must stick to the fundamentals of corporate development - profit, to maintain the operation of this giant ship, and to ensure the reserve force necessary to adjust the strategic direction.


  Broken Arm and Nirvana


  To be honest, if you want to wear a crown, you must bear it, but who is willing to "resign" easily for the glory of being a champion? After all, this is about the brand image and reputation, which needs to be vigorously maintained all the time.


  But the reality is that only those who are about to lose or find it difficult to reach the top will say "it's not important", but behind the scenes, companies need to truly realize that quality is more important than sales.


  Presumably, whether it is Volkswagen or Toyota, or even SAIC Volkswagen, the No. 1 car company in China, and Geely, the No. 1 independent car company, they all gradually want to understand the development path of the company. What are they pursuing? Just like the inflection point after the passenger car enlightener SAIC Volkswagen lost the domestic car company championship, and just like the autonomous giant Geely dormant in the middle of the mountain for three consecutive years after the peak of 1.5 million vehicles, this transformation is accompanied by a company that wants to become outstanding all the time. 's enterprise.


  Therefore, the unprecedented slashing of fuel vehicles is more like a broken arm in the transition of the automobile era to Volkswagen. Even if it is currently starting from the European market, it is bound to extend to the Chinese and American markets in the future. "Even if Volkswagen spends 52 billion euros (the largest investment of its kind) into electric vehicles, it will not increase unnecessary sales," Antlitz said.


  Undoubtedly, these series of actions are all a part that must be experienced in the promotion of Volkswagen's new energy strategy.


  According to the 2030 NEW AUTO strategy released by the Volkswagen Group, the proportion of pure electric vehicles will be increased to 50% in 2030. By 2040, almost all new cars in the group will achieve zero carbon emissions in major markets, and will be fully realized by 2050 at the latest. The goal of carbon neutrality. Under this target, the basis of revenue and sales is expected to gradually shift from internal combustion engine vehicles to pure electric vehicles. The internal combustion engine vehicle market is expected to decrease by more than 20% in the next 10 years, while the electric vehicle market is expected to grow rapidly and become the leading technology that surpasses the internal combustion engine vehicle market.


  VW said strong cash flow from its lucrative combustion engine business could fund and accelerate the transition to electric vehicles. The synergies of lower battery and factory costs and scale expansion are expected to help boost the profitability of electric vehicles, while the profitability of diesel locomotives is expected to shrink further due to the cost and tax disadvantage of high CO2 and Euro 7 emissions.


  The implication is that Volkswagen needs to transform, for example, it needs more money, especially Volkswagen plans to allocate 73 billion euros by 2025 for future technology. In response to this new strategic approach, the Volkswagen Group has raised its operating profit margin target for 2025, increasing it from the current 7-8 percent to the current 8-9 percent. At the same time, it had to optimize its ICE vehicle business by narrowing its model and ICE powertrain portfolio and improving pricing policies, and finding a balance between sales and profits became a natural thing.


  Especially in the downturn of the market, the turmoil in the world has brought about an increase in the upstream cost of the industrial chain, and the estimate that Volkswagen's electric vehicles will soon be as profitable as fuel vehicles has been questioned. Diess also admitted that the cost of new energy vehicles is "a hurdle". The industry is expanding in depth and the Volkswagen model lineup is huge. There are more than 300 models in the world, which is far inferior to Toyota in cost control.


  In the face of problems such as electrification and profitability, Toyota, which has achieved the ultimate in stability and lean, still has a long way to go. The public is no exception. The transformation of new energy, two shackles are tightly bound to all market participants, how to achieve a balance between traditional business and new sectors.


  According to Volkswagen's plan, they will add many pure electric models, but they will not increase new production capacity. Instead, they will transform and upgrade one factory after another from fuel vehicles to electric vehicles, while retraining workers. Antlitz added that the principle of cost reduction over time remains "unchanged" and that new battery technologies will reduce costs in the long run.


  Of course, in the Chinese market, which accounts for one-third of Volkswagen's market share and profit contribution, Volkswagen's strategy of "abandoning" global champion sales is bound to bring a series of chain effects, especially under the guideline of making more money.


  Therefore, we can almost predict that in the low-end market Skoda, at least in the current stage of fuel vehicles, Volkswagen will not put too much energy, which also means that these companies and brands have not yet entered the stage of new energy vehicles, and will also Ushering in a further decline; and similar to SAIC Audi and Volkswagen Anhui, it seems that Volkswagen will further increase its weight in terms of future product introduction and new energy layout, and more domestic products will also come in the next few years.


  We don't know how the story of Volkswagen will be written, and whether it will leave the Volkswagen on the top of the tide or slip into the abyss, but there is no doubt that the competition and pattern of the future automobile world will be more exciting with the turn of an automobile giant.

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