Volkswagen leaning down and optimizing product to try and double profitability

As Volkswagen Group refocuses its business strategy to further prioritize profitability and cashflow, it is announcing a new optimization program pertaining to its Passenger Cars namesake specifically. The “Accelerate forward | Road to 6.5” program will leverage synergy across the VW Passenger Car brands in order to more than double profits to 6.5%.

Ahead of today’s news, most updates coming out of Volkswagen Group have been encouraging. The automaker’s volume brand saw BEV deliveries up 50% in Q1 of 2023, and its namesake continues to pepper the public with new and exciting all-electric models in its pipeline.

This includes the recently announced ID.7 compact, a GTX version, and the possibility of an all-electric Beetle. As the German automaker looks ahead toward a zero-emissions future, it wants to ensure in ensures a long term investment and cash flow to stay competitive.

As a result, Volkswagen Group has introduced a new program called “Accelerate forward | Road to 6.5” in order to simplify its volume EV offerings and maximize profitability.

Volkswagen looks to boost profitability to 10 billion euros

Volkswagen Group CFO and COO Arno Antlitz echoed a need for the automotive conglomerate to hone in its focus on profits and cashflow in a LinkedIn post that coincides with a press release from the Group itself.

The result is the board’s decision to launch “Accelerate forward | Road to 6.5” – aimed specifically at the volume brand vehicles including Volkswagen Passenger Cars, SEAT/Cupra, and Commercial Vehicles. Passenger brand CEO Thomas Schäfer elaborated:

The program is the number one priority for the entire Board of Management. We must build new strength for the Volkswagen brand and position it robustly for future growth, which is why we are now getting an enormous concerted effort off the ground. We need to achieve a sustainable return on sales of 6.5 percent in the Volkswagen brand. Achieving this in 2026 is very ambitious, but feasible if we pool our efforts. This will enable us to safeguard jobs, finance our future from our own resources and continue to invest in new vehicles and technologies, in the modernization of our plants and in staff training. Leveraging synergies and becoming more efficient, faster and more effective across all divisions of the Company. Stephan Wöllenstein is one of the most experienced international managers we could have chosen to manage this core program. With ‘ACCELERATE FORWARD | Road to 6.5’ we will collectively lay the foundations for successful implementation of our brand strategy.

Volkswagen states that the new program will be implemented at two levels. The first addresses administration, technical development, material costs, products, price/mix, vehicle construction, sales, and quality. Each area will be given specific goals that should all aid in lowering costs and increasing revenue.

The second level of attack will be reducing Volkswagen model complexity, the number of variants and overall product to optimize production, and increase profitability. Some models, like the Arteon for example, will be discontinued.

As a result of the new program, Volkswagen expects to achieve a return on sales of 6.5% by 2026 alone, which translates to about 10 billion euros ($10.9B) in earnings. The company states it is on open discussions with its employee representatives to ensure they are in the loop and consulting on the decisions and how it may affect job security.

The program is expected to be up and running by October 2023 following a planned agreement with the employee representatives.