VW gets really serious about tech acquisitions

volkswagen
A VW badge sits on the engine of a Volkswagen e-Golf electric automobile inside the Volkswagen AG (VW) factory in Wolfsburg, Germany, on Friday, May 20, 2016. Volkswagen AG agreed to raise German workers\' pay after labor leaders vowed that employees wont foot the multi-billion-euro bill to resolve its diesel-emissions scandal. Photographer: Krisztian Bocsi/Bloomberg

Volkswagen AG mapped out details of its transformation from a mass manufacturer of cars to a provider of transportation services by unveiling a car-sharing service and promising digital acquisitions as part of a 3.5 billion-euro ($4 billion) push into next-generation automobiles.

The plan will kick off in Berlin, where the manufacturer will put 2,000 all-electric vehicles on the road by the second quarter of 2019 under the We Share label, competing with the DriveNow and Car2Go offerings of Daimler AG and BMW AG. Volkswagen plans to start technology partnerships this year, with purchases likely “clearly before Christmas,” Juergen Stackmann, head of sales at the VW namesake brand, said in a Bloomberg Television interview in the German capital.

“We will be a device and software company,” Michael Jost, the VW brand’s strategy chief, said at a Berlin press conference introducing the car-sharing program. “To deal with this development, we need to reinvent the automobile.”

Automakers are pushing rapidly into new areas to cope with powerful new technologies that threaten havoc with manufacturing business models little changed since the advent of the assembly line. Volkswagen, the world’s largest carmaker, is years behind car-sharing efforts at Daimler and BMW, which recently said they would join forces. But the sheer scope of the We Share effort shows how VW can create immediate competition for its German rivals.

The We banner will be used for a package of mobile applications that VW customers can access with a single sign-on and that will be available for both conventional autos as well as the company’s new electric cars. Services will include electronic payment for parking, in-car package delivery, fuel-price tracking and localized deals from retailers. The project has a goal of generating 1 billion euros in annual revenue by 2025.

If VW rolls out the We system across the group as planned, it will add more than 10 million users each year, creating a network that no other single automaker can match. The digital push is "like a mega-startup," with growth expected to accelerate once the first phase of development is completed in seven years, Stackmann said. “We want to get to the point where the car knows what you want."

New software in particular is accelerating the shift toward what’s being dubbed “peak car” -- when sales of private vehicles across the western world will plateau before making a swift descent. Faced with new competition ranging from Uber to Waymo to little-known startups, automakers are pouring billions into remaking themselves into mobility companies.

VW’s technology, for example, will allow car owners to rent out their own vehicles by passing digital keys to other users. At the same time, the effort will help the company sell electric cars -- another technology challenge -- by by introducing its customers to battery-powered vehicles. We Share will be a “major user” of VW’s I.D. sub-brand of electric models, Stackmann said.

“Our mission is to become zero-emission, as much as we can, and this service will help us to get there,” he said.

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