How Volkswagen Uses Digitalisation to Drive Growth


In recent years, Volkswagen ("VW") has performed well. It is ranked second globally in 2018 in terms of number of cars sold accounting for 6.9 million light vehicles. Its car brands include Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT and Škoda.


In terms of market share, it is the undisputed leader in China and Europe (with more than 10 percent market share) while playing a central role in Africa and Asia. VW currently maintains facilities in 14 countries - it produces vehicles for more than 150 nations.


VW Performance 2018, VW Transformation, Volkswagen Future
VW Steps Up Pace to Become More Efficient, Productive and Agile (Source: Volkswagen AG)

According to media release, VW launched a strategic plan named "Transform 2025+" in 2016 to focus on clearer brand positioning across the various regions and segments, backed by significant improvements in efficiency and productivity. It announced that it will be making massive investments in e-mobility and connectivity.


Transformation is in 3 phases:

  • Phase 1 entails restructuring its core business and completing a transformation along the entire value stream.

  • Phase 2, up to 2025, Volkswagen intends to take the lead in e-mobility on the basis of its regained strength as a leading, profitable volume manufacturer. The strategy in this phase aims to create a broader earnings base, for example through new mobility services.

  • After 2025, VW intends to play a key role in shaping the major transformation in the industry. The objective is to achieve a leading role in the new world of mobility by 2030.


VW plans to invest up to €4 billion in digitalisation projects through 2025 – mainly in administration, but also in production. VW is implementing agile working methods, improved processes and digitalisation. This is to reduce burden on employees and speed up processes. Tasks that used to be performed manually are simplified through improved IT.


Digitalisation is expected to create at least 2,000 new jobs. But consequently, up to 4,000 jobs in non-production units will not be restaffed if the tasks performed become redundant as a result of digitalisation, process optimization and organizational streamlining.


 

Digitalising Production Facilities


VW is currently working towards digitalising its entire production facilities in Zwickau and converting it become a pure electric car ("e-car") factory and the most efficient.


It wants to make e-cars accessible to millions of people and intends to manufacture the first pure e-car at the end of 2019 at the Zwickau factory. It expects to invest approximately €1.2 billion in the transformation.


VW Zwickau, Transformation, E-Car Factory
Transformation of Zwickau for E-car (Source: Volkswagen AG)

It is the world's first electric transformation of a large conventional factory. It will entail the use of Industry 4.0 robots and driverless transport systems, which bring components to the assembly line in an entirely autonomous manner. In assembly, the degree of automation will increase nearly threefold.


So far, VW has retrained around 2,800 out of 8,000 employees in the plant to enable the move towards e-mobility and this is a big step towards re-skilling for digitalisation. Zwickau is just the first step for VW for its production facilities. It will continue investing in digitalisation to drive costs down.


 

Running data lab to support development and innovation


VW opened a highly specialised data center in Munich. The purpose is to generate solutions powerful enough to drive the group forward and to keep up with constant technological change.


The center is initially focused on data analytics where its experts analyzed complex data, but it has now progressed to develop artificial intelligence capabilities. The data lab team has been growing since opening and is supporting its global operations.


Today, it has approximately 80 IT specialists, data scientists, programmers, physicists, neuro-scientists and mathematicians, who are pursuing research and developing applications in the field of artificial intelligence (especially machine learning).


VW has recognised that artificial intelligence ("AI") and deep learning are important because autonomous driving, zero-emission mobility and digital networking are virtually impossible without it.


To expand competence in the field of AI and deep learning, VW established a strategic partnership with US technology company, NVIDIA. The partnership will shape the development of a new generation of intelligent Volkswagen vehicles to create new cockpit experiences and improve safety.


Among applications is the “Intelligent Co-Pilot” application, which will include convenience and assistance systems based on processing sensor data from both inside and outside of the car.


VW Sedric, VW Concept Car, VW Autonomous Vehicle, VW Artificial Intelligence
VW Sedric - First VW Autonomous Vehicle Concept Car suitable for car sharing and for personal use (Source: VW)

VW also established a startup support program at its Data Lab to provide technical and financial support for international startups developing machine learning and deep learning applications for the automotive industry. Together with NVIDIA, VW accelerated its artificial intelligence development by admitting five startups to the support program.


 

Developing Its Own Digital Platform


VW is also developing its own digital platform to enable it to move closer to its customers and develop new earnings potential with a comprehensive range of services. The platform is named 'Volkswagen We'.


VW, Digital Platform, VW We
VW We Digital Platform

It aims to have about 80 million active users on the platform by 2025 to have the leading digital ecosystem in the automotive industry.


Volkswagen estimates that its sales revenue from services related to networked vehicles will reach about €1 billion per year by 2025 and expects a significant contribution to earnings from this business area.


One of the areas VW's digital platform will work on is personalisation via user ID. Using the user ID, a user can customise a car (or a car from car ride sharing) into their own car with a swipe on the smartphone.


Users can have their infotainment system settings, seat position, heating and ambient lighting conditions set up instantly with just a move of one's finger. Cars can also become keyless using a digital key from a mobile app.


 

In summary, AI is applied in all areas at VW such as in vehicle and automotive technology, and business processes and application. VW is embracing the phenomenon of digitalisation and is capitalising on it to bring growth, and is an example on the importance of digitalisation on the automotive industry.


The automotive industry will be driven by shared mobility, connectivity services, and feature upgrades and new business models.



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References


Focus2move, Volkswagen 2018, Sales trend is slow while new "Transform 2025" plan will boost at 9 million, https://focus2move.com/volkswagen-global-performance/, published 20 March 2019

Volkswagen AG, Volkswagen invests up to €4 billion in digitalization, https://www.volkswagenag.com/en/news/stories/2019/06/volkswagen-invests-up-to-4-billion-euro-in-digitalization.html, published 5 June 2019

Volkswagen AG, Zwickau conversion to Europe's most efficient E-car factory, https://www.volkswagenag.com/en/news/stories/2018/11/zwickau-conversion-to-europes-most-efficient-e-car-factory.html, published November 2018

Volkswagen AG, TRANSFORM 2025+ Volkswagen presents its strategy for the next decade, https://www.volkswagenag.com/en/news/2016/11/transform-2025.html, published November 2016

Volkswagen AG, What exactly does an AI researcher do, https://www.volkswagenag.com/en/news/stories/2018/06/what-exactly-does-an-ai-researcher-do.html, published June 2018

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