Volkswagen's $40 Billion Offensive

Douglas A. McIntyre

Volkswagen’s dictionary of terms used by management includes a word that most other car manufacturing executives don’t use. The German giant is about to go on the “offensive” as it elbows into the electric and self-driving car businesses. VW’s intentions are particularly aggressive based on the sums it is willing to put into it efforts.

The top management of VW announced:

The Volkswagen brand is consistently implementing its Transform 2025+ strategy. The main focus is on the further development of modular production, the continuation of the model offensive and further orientation towards e-mobility. For this purpose, the core brand of the Volkswagen Group will be investing about €22.8 billion throughout the world from 2018 to 2022.

Like many large companies, VW has a long-term plan it has revealed to the public and to investors. VW’s overall strategy involves cuts in staff, another standard part of longer term plans, as it becomes more efficient. And technology will be the primary catalyst, another staple of how global companies describe their futures.

VW has several advantages as its offensive begins. It is the largest car company in the European Union by sales. It generally holds the top or number two spot in China, the world’s largest car market, swapping places with General Motors. Its sales in the United States are negligible, perhaps the largest hurdle to its worldwide goals.

VW’s size gives it several advantages over much smaller competitors in the field, particularly Tesla. VW’s dealer networks in most large markets are huge. Its balance sheet is massive and rock solid, which gives it nearly inexhaustible funds for R&D and product development. The same can be said for its marketing budgets.

Perhaps VW’s largest risk is that it misjudges the world’s largest markets in both the timing of the launch of its products and the features these cars, sport utility vehicles and crossovers have. The electric car and autonomous vehicle sectors are still in their infancy, and all companies in the business have to guess what the public’s receptions will be as they move away from cars powered by gasoline and diesel and those people drive without assistance.

VW’s offensive risks $40 billion as the company moves into uncharted territory.