WolfsburgVolkswagen-Boss Herbert Diess In particular, the auto industry in general and its own company are harshly challenged and face tremendous challenges. It must now necessarily the entry into the electric age success. As a heavy mortgage, he feels the “great dependence” in battery cell technology from Asian suppliers. This said in the Handelsblatt interview: “Let’s assume that the share of electric vehicles in 2025 will be ten percent, (…) we talk about a turnover with batteries between 50 and 60 billion euros.”
In view of this dimension, it is not too late, in the battery production enter. He thinks of the billion investment needed for research, development and production, especially to the automotive suppliers and less to the car manufacturers: “If a manufacturer like VW Would produce a battery cell, a company would like us Daimler the cells probably will not lose weight. Better would be a cross-brand manufacturing. “
In addition to the new drive technology sees the VW boss digitization as the biggest task, he already has the fully networked car in mind. “We have to tackle the digital transformation if we want to survive,” Diess said, pointing to strong competition from the US Google or Apple and from China like Tencent and Alibaba,
In order to catch up, VW plans “an extremely fast development of competence”. This should be achieved through partnerships with other companies or through acquisitions of software companies. Diess said, “We need to be at the forefront of new technologies. Weaknesses should not allow a company like VW. “
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The big Handelsblatt interview with VW boss Herbert Diess
Well-tanned, Herbert Diess enters the meeting room on the thirteenth floor of Wolfsburg’s VW headquarters. And first tells in detail about his holiday on Lake Garda. In the house of a friend, the VW boss had lodged with family. Then, from Padenghe on the southwestern shore of the lake, head north to Malcesine, a challenging surfing area. This is a passionate and experienced kitesurfer, but without losing the respect for the sport: “Depending on the wind – sometimes the dragon becomes a beast.”
Mr Diess, you recently said in a small round that the German automakers will only win the race for the new mobility with a probability of 50 percent. Such pessimism is rarely heard from the German car industry.
You call this assessment pessimistic, I think it’s pretty realistic. We have to shake things up in the current situation, so I prefer to speak plain language. The structural change affecting the auto industry is great. We are entering an era of electromobility, in which the internal combustion engine is losing importance. The electric drive does not give the automakers as many differentiation options as we are used to today. An even greater challenge is to connect the car seamlessly to the Internet.
Vita Herbert Diess
What is the future success factor? Above all, the intelligence of the car offers a differentiation option. Each car will be a separate node in a networked car world, so we have to start. The software in the car plays a crucial role, because it defines the character of the car significantly. But if we are completely honest: This is not yet the domain of German automakers, which can corporations such as Google and Amazon even better.
The German corporations did not come under pressure because new competitors from the USA and China – like Tesla and Geely – No, the pressure comes from the new skills needed in the age of digitization. Here in Germany So far, we’ve been able to stand out very well from the rest of the world – with classic technology and broad engineering knowledge. With the advent of software, apps and special services in the car, it has now become possible for providers from other industries to push into automobile production.
A phenomenon that has shaken up other branches of industry. Such developments have always occurred. A well-known example is the photo industry, where few vendors have survived and new ones have come up with innovative technology. The central task for the automotive industry is derived from this: We must master the digital transformation if we want to survive.
Which development step is more important: e-mobility or digitization? The essential step is digitization. The car becomes an Internet device, fully networked like a smartphone. Software updates “over the air” distributing new functions are all part of the new world of automobiles. The fact that vehicles have to go to the workshop for a software update will be a thing of the past. This is much more important to us than the change in drive technology from the combustion engine to the electric drive.
What else is changing? Will the customer focus more on the future? Absolutely. We car manufacturers have until today hardly direct customer contacts, the connections run almost exclusively over the dealers. That will change, for example through the software updates, which will send the manufacturers in the future. That’s why we had to negotiate new contracts with our dealers.
A central point is who owns the data that will be produced in a car in the future. The customer decides what happens to his data. Manufacturers can not expect to receive all the data per se. That’s why we have to fight, with good offers. It is also in the interest of the customer that we process data, for example, to improve traffic safety. And we need to get better at evaluating the data: there are still too many drivers who rely on their mobile phone information rather than on our navigation devices on their journeys.
Is not it impossible to compete against the data giants Google, Apple or Amazon I do not think so. The car-friendly application of a navigation device in the vehicle, we control better. How fast can something happen while someone is working on their mobile phone while driving? On one point, however, I agree with you: The data quality of IT providers is clearly better because they have more data. But that will surely change over the next few years.
Who are you the biggest competitors in the fight for the data? These are of course the big data collectors from the USA like Google or Apple. From China providers such as Tencent and Alibaba are added. On the producer side there are Tesla in the US or Nio and Byton in China. For the newcomers the car is extremely interesting. The networking of vehicles will double the time of Internet usage worldwide – creating completely new markets.
Which internet offers will be available from VW in the future in order to set itself apart from the competition? It is not just about internet offers, but about the operation of the complete system automobile with a rapidly increasing data volume. We certainly have the chance to play successfully in IT. For example, today we are already the technological leader in integration – in other words, in the ergonomically correct use of all these technologies. After all, our development goal is the autonomously driving car – for which we are expanding our IT competence comprehensively, and we will clearly differentiate ourselves from this.
The VW Group sells eleven million cars each year, which could be used to collect huge amounts of data. Which products and services can be derived from this? You can do a great deal with the data from the cars. The search for a parking space can be simplified and organized better, also from an environmental point of view this is an important point. The search trips could be significantly less. Traffic jams, the warning of dangerous situations – these are all application possibilities. Overall, we will be able to control traffic much more effectively and efficiently in the future. We have to be at the forefront of new technologies. Weaknesses should not allow a company like Volkswagen.
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How do you want to achieve that? Volkswagen is still not particularly noticed with modern software inventions for the car. This will only succeed with additional efforts. In Wolfsburg today we have about 10,000 developers. Only a few hundred of them work in the software sector. So we have to develop these skills, also through partnerships with other companies. We need an extremely fast competence development here. That’s why we work on partnerships or acquisitions of software companies. Here we will see more results in the coming months.
Which companies do you think I do not want to make public these considerations.
Does not Volkswagen have to be much faster, above all? Unlike Apple and Google, an automaker like VW is extremely slow in introducing new techniques. Developing and producing a car are complex processes that take time. From this, our model cycles have evolved over several years. Now we also need comprehensive software know-how. Software updates are sent every month. We know that from the smartphone. We have to get used to such short intervals. This change will certainly be exhausting, no question.
That does not sound very confident. I’m absolutely confident. The traditional car companies can do a lot. The example of Tesla shows that it is not so easy to become a globally successful automobile manufacturer. Building a new car plant and building the logistics for it is no problem for us. Or to offer a new model or a new technology for China, North America and Europe – that is something we also master. In recent months, we have opened three new plants in China. They run high, produce without big problems. Such capabilities will continue to be important in the automotive industry in the future. That’s why we have good chances in the competition, despite the new competitors. We will show that, too, if we start our electric offensive in the next two years – almost at the same time in all important car markets.
Do you regret that electromobility plays such a subordinate role in Germany? One has almost the impression that the Germans are E-Mobility deniers. The electric car is not spurned in Germany. If we did not reach our limits at present, we could sell more electric vehicles today. An e-Golf with a range of 300 kilometers and the price of 30,000 euros is accepted today. That makes me optimistic because from 2020 we will have a much better and wider range of models.
2020 will be the electric year for Volkswagen – not just for Volkswagen. When it comes to fleet consumption, all manufacturers must adhere to the new limits of carbon dioxide, which is only possible with electric models throughout the industry. In 2020, we want to sell 220,000 to 230,000 e-cars in the VW Group in order to achieve our fleet goals.
VW factory
“Building a new car plant is not a problem for us,” says Herbert Diess.
(Photo: Getty Images, Photo: Per-Anders Pettersson)
You will only succeed if the charging infrastructure in Germany is significantly better. That’s right. Volkswagen is doing a lot, but this task can not be tackled by industry alone. The German automakers are working on a fast-charging network along the highways. Volkswagen offers wallboxing technology to charge a car at home. Of course, it would be helpful if politics became more involved in this field.
How many charging stations do you need by 2020? You can not fix that on a number. We simply need a sufficiently dense network of fast charging stations to be able to go on holiday, for example. Add to this the mentioned charging possibilities at home and at work. Regulatorically, the state could make the requirement that, for new buildings, charging facilities must also be provided.
And the state should also get involved with money? What sum do you think? It’s not about a sum, but rather about a consistent commitment to the policy of electromobility. The municipalities could do a lot, too. For example, the promotion of e-cars, which is now being discussed, would also be helpful. Such tax incentives would boost electromobility.
Because the customer primarily responds to financial incentives, a lot depends in our industry on the regulatory framework that sets the state. Today we have markets where the diesel share is five percent. In Europe, diesel is more than 90 percent in some countries. The difference can only be explained by the amount of diesel taxation.
The electric drive, then, is the future? Still, I would warn against euphoria. From an environmental point of view, the electric drive only makes sense if the primary energy, ie the electricity for operation and also for the production of the battery, is produced as free of carbon dioxide as possible. In Germany, we still have 600 grams of carbon dioxide per kilowatt-hour of electricity – this is due to the high share of coal in power generation. That’s a lot in the international comparison. So the introduction of electric vehicles alone does not necessarily help with climate change. That’s why we will continue to use the diesel.
Why have German automakers so far done so little research and production of battery cells? Volkswagen, Daimler and BMW are completely dependent on Asian providers. I find it scary that we are in this big dependency. Among other things, this has to do with the fact that in the 1970s Germany gave up all its consumer electronics with their need for battery technology. Actually, we were always in the front in battery technology. Unfortunately, we have lost the connection and thus the industrial mass production in Germany.
What is the market for battery cells? Let’s assume that the share of electric vehicles in 2025 will be ten percent. That would be about ten million cars. The value of a battery is then probably still 5000 or 6000 euros. So we are talking about a turnover between 50 and 60 billion euros. That’s twice as big as Bosch’s or Continental today. So there is a value chain where the German car industry would be well represented if we make our contribution.
All the less one can understand why the business is not made by German car companies. I see this rather as a task of the automotive suppliers, because it depends on a profitable operation on high volumes. If a manufacturer like Volkswagen produced battery cells, a company like Daimler would probably not take the cells off us. Better would therefore be a cross-brand manufacturing. Only suppliers can offer that.
Bosch has thought long and hard about a production – and then decided against it. It is a pity that from the planned cooperation of Bosch and Samsung nothing has become. In my view, it is a little too timid on the German side, even if it is a huge billion investments. But who else should do it? German industry would be predestined for this. We have the basic skills for this, for example in plant construction or in manufacturing technology. But it is still not too late, the entry can still succeed. The Chinese just show in Germany that the entry is also feasible with some delay.
So Germany can still become a battery location? At Volkswagen, we have decided to invest in the next generation of batteries, the so-called solid cells. In addition, we have increased our stake in the US developer Quantumscape. Initially, a pilot production will be built in the US, and by 2025, we expect it to come to Europe as well. We are also keen to support further European activities in this direction. Maybe there will be a European consortium …
… the initiative of Minister of Economics Altmaier.Richtig, the idea is good. I believe that we need and can develop this technology in Europe, with expertise that goes beyond the capabilities of Asian cell producers. We would finally have to get up and we would be able to do that in Europe too.
You talk differently about the topic than many of your colleagues. So far, it has always been only: “Battery cells? No, that’s not worth it in Germany. “As I said: The need is there. And we are well advised not only to do the business ourselves, but also to dominate and drive this key industry. Otherwise, others will dictate the pace of development. It has long been the recipe for success in our German and European automotive industry that we manufacturers and suppliers set global technological trends. We must continue to do so if the future of our industry at this location is important to us.
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Would it be simpler for suppliers to receive government support? Government support is common practice in large economies. In China, for example, the state has decided that cell production is to be built up and gets it on its way. Of course this is not so easy with us. A certain degree of coordination would certainly be helpful and feasible in Germany and Europe as well.
State intervention does not always lead to the best results. If we look at the successes of the German automakers, then this has to do with the state-set framework conditions. Among other things, the fact that we became the world market leader in premium cars in Germany is due to the tax incentives for company cars. We are also good at diesel engines because the diesel fuel is reasonably priced.
The US President has an “America First” policy and China has a “Made in China 2025” plan. Would Europe also need such an industrial plan? Dialogue and a future-oriented approach are also necessary here – in the light of the question: How can we maintain our lead in cars? For that we need a plan, at least the rough framework conditions. This includes cell production. Future policy is the right word for this.
As the world’s largest carmaker, Volkswagen could play a pioneering role in these questions of the future. But with the diesel affair your company lost a lot of confidence in politics. Unfortunately, that’s right. We lost a lot of credibility, the industry in general and Volkswagen in particular. There are politicians who are reluctant to talk to us today.
How do you address this defensive attitude? We seek dialogue and act consistently: by tidying up and eliminating customer problems. With transparency we want to create new trust, and that is a long way. We met the requirements of the Diesel summit. The cars that are out on the streets outside have been repaired. Almost 2.5 million cars have received improved software in Germany. Now in the next few months more than one million more cars will be added.
The group has a long time AudiCEO Rupert Stadler arrested. Did not the Volkswagen damage? I have known Rupert Stadler as a colleague for years, and I perceived him as a scout in the diesel crisis. Personally, I hope that he comes out of custody soon. But that’s in the hands of the prosecutor.
Do you have any contact with him? We are not allowed to keep any contact at all – communication for us is only through his lawyer.
But there is such a thing as political responsibility, even in a company. Have you held on to Rupert Stadler too long in this regard? A lot has happened to us – even at the top. The Board of Management of Volkswagen looks very different today than it did three years ago. In addition, we have replaced the technical directors. Political responsibility has also taken over the former CEO.
But Mr. Winterkorn still receives a generous pension from the Group … Even in difficult times, we have to keep to contracts. Consequences are fundamentally only possible if there are violations and it can be assumed that these consequences would also be contained in a legal proceeding. And maybe some procedures have not even started yet.
But the basic direction does not seem to be right yet because new problems are becoming known time and time again. This is also a burden for us and, among other things, also depends on the length of the proceedings. We have caused the crisis and now we have to live with the consequences. After completion of the public prosecutor’s investigations, for example, the file inspection is currently taking place and causes new public interest.
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Several accused employees are now to receive dismissals without notice, including former head of development Heinz-Josef Neußer. Why? We have only now got insight into the investigation files and now act consistently on persons in whom we also find a misconduct after evaluation of the investigation of the prosecutor. Affected at the moment is a handful of people.
To what extent does the motivation of the employees by the diesel affair suffer? Our team has been badly affected, in some areas unsettled. I am sorry for the many honest colleagues. In the engine development of VW and Audi no stone has stayed on the other. Fortunately, we are doing very well economically, that helps. But the subject will continue to occupy us. The legal processing takes years. I dedicate about 30 percent of my working time to diesel processing.
How much is Volkswagen paralyzed by the processing of the diesel affair? That can not be expressed in numbers. But the diesel crisis also made the new WLTP homologation tests a real challenge for us. The same people who have to deal with the diesel crisis now have to master the WLTP program. Of course, we realize that we have consumed resources there. But the moral is still good, the team is against it and wants to put it back in order.
Did you yourself misjudge the WLTP problems at the beginning of the year? Yes, the signals from the team were actually more positive, I have to admit. We were too optimistic, that has now turned out. But in our defense, I have to say that we have never re-registered all vehicles in a year. The authorities also had to prepare for it.
Does that lead to consequences? Of course, because we will receive new approval regulations almost every year. We have to set ourselves up so that we can continuously master the test program. This also includes thinking about the diversity of models in the Group: do we really need every engine variant and complexity? We are investigating this, we must certainly be leaner here. And of course we have to strengthen the team even further.
Complexity is a good keyword. Has Volkswagen not become too big with twelve brands and 640,000 employees to be able to position itself properly for the future? A large corporation like Volkswagen has initially faced with the transformation disadvantages of smaller companies. That’s why we decided on the new corporate structure this year. It should help us to put off the clumsiness of the large corporation for a while. We create smaller units that can make decisions faster and more flexibly.
Could there be additional sales from daughters like Ducati? Is the IPO of the truck division running? Looking to the future, we have to position ourselves correctly in order to manage the size of the group. This is the main reason for the new structure with the brand groups. The truck business has little synergy, so it can be very independent of the car. With Ducati’s motorcycles, our cars also have few synergies. That’s obvious.
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Her predecessor Matthias Müller failed with the sale of Ducati. Start a new attempt Ducati needs a plan for the future, a perspective. How does the brand technologically position itself in the direction of electric drive? How will further growth be possible? I can also imagine a merger or a partnership with other brands. Ducati simply to have as a motorcycle icon in the VW group entrepreneurial at least not enough.
Herbert Diess makes sales more feasible? The key questions are: Is our portfolio properly structured and do we manage the individual parts with the necessary attention? We have business areas that are not part of our core activities – such as MAN Diesel & Turbo or mechanical engineering company Renk. So we have to think about how best to do these things. The works council also sees this. After all, it is our common interest to create work-safe jobs for the workforce – and there are several options for that.
How will your workforce change over the next five years? Are new software jobs replacing the jobs on the production line? Does the transformation capture ten percent of all jobs? That’s the direction it will take. The automotive industry is becoming more of a tech industry. Time is short, but I am confident that we can make the change. Because we are a slow-moving industry, which is simply related to the long product cycles. Two product life cycles are around 12 to 15 years for us. This gives us the time we need to prepare our workforce for the new conditions.
What does that mean in concrete terms? The digital transformation will accelerate significantly once again. That is why we are constantly hiring new employees and pushing the continuing education of our workforce. At the same time, there will be more partnerships, investments and acquisitions in the relevant environment. And we talk to the works council about how we can make the conversion well. The Future Pact, which cuts jobs in some parts of the company and at the same time builds capacity in new areas of work, points the way. We have to tackle the topic in time, then we’ll do the job too.
How long do you want to remain as chief executive officer of Volkswagen? I have a five-year contract. It certainly also belongs to my tasks to prepare a successor in time. Volkswagen will be well prepared for the next change at the head of the group.
Mr Diess, thank you for the interview.