How Will Volkswagen’s Strategy 2025 Impact Its Value In The Near Term?

by Trefis Team
-0.06%
Downside
16.27
Market
16.27
Trefis
VWAGY
Volkswagen AG
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Having burnt its hands in the Diesel gate scandal, Volkswagen ADR (OTCMKTS: VWAGY) is trying hard to clean its dented image. For this, the company has devised “Strategy 2025,” under which it plans to focus on green or environment-friendly vehicles. Under the strategy, the company plans to launch 80 new electric vehicles and become the leader in the e-mobility space by 2025. Below, we discuss how this strategy will boost the company’s value in the coming years.

We currently have a price estimate of $16.27 per share for the company, which is in line with the market price. View our interactive dashboardVolkswagen’s Price Estimation – and modify the key drivers to visualize the impact on its valuation.

Based on the growing demand for cleaner and environment-friendly vehicles, Volkswagen expects these vehicles to form 25% of the global passenger car market in the coming years. Consequently, the company has laid down its Strategy 2025, under which it aims to launch 80 new electric vehicles by 2025, of which 30 will be purely battery-powered electric vehicles (BEVs). Further, the company aims to also produce 40 electric/hybrid vehicles in China during this period. With these new greener vehicles, the company expects to reach annual unit sales of 2-3 million by 2025, which will drive its top-line as well as valuation.

In addition, since this strategy aligns with Volkswagen’s increased focus on e-mobility and newer and safe technologies, it is likely to invest heavily in this segment. The company claims to earmark a minimum $23.37 billion from direct investments in e-mobility, battery technology, and production for electric vehicles over the next few years. For instance,  Volkswagen has recently announced a $100 million investment in QuantumSpace Corporation, increasing its stake in the California-based battery-building unicorn. Volkswagen is now the major and only automobile investor in this unicorn. The objective behind this deal is to establish a production line for solid-state batteries by 2025 and gain a first mover advantage in the electric vehicles segment.

Further, Volkswagen launched a new venture, Hey-car, last year. This venture operates in the used-car market in Germany and competes with AutoScout.24 (run by Scout.24) and Mobile.de (run by eBay). Recently, Daimler AG acquired a 20% stake in Hey-car, depicting that automobile giants are investing heavily in e-mobility and new technologies associated with it. Currently, electric vehicles reflect a very small portion of the company’s stock. However, this segment is growing at a fast rate and could witness a significant surge in the coming years. Volkswagen aims for the new mobility solutions unit to generate sales revenues in billion by 2025.

Based on the above factors, we believe that Volkswagen has put the Diesel gate scandal behind it and is proactively expanding its presence in the electric vehicle markets. While this segment’s contribution to the company’s total value is almost negligible at the moment, it is likely to become a crucial part of its value by 2025.

 

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