The times are a changin' and the top brass at one of the world's largest automakers knows it. It's time to shift with big changes toward electrification but with an eye on profit margins, according to Volkswagen Group CEO Herbert Diess.
On Thursday, the Financial Times (subscription required) reported that Diess told 120 executives in Berlin that the automaker will need to "slaughter some sacred cows" and "the time of classic car manufacturers is over.”
Diess noted Tesla is valued like a tech company while VW is valued like an automobile company, and the German automaker needs to shift toward the former as software expertise will determine VW's future.
The chief executive noted the lack of urgency toward this shift within VW's ranks and that a "radical change of direction" is needed as the automaker moves into the electric vehicle era.
While Volkswagen Group reported nearly 11 million new vehicle sales in 2019, Diess reportedly hinted that a further break-up of the brands within the Group might be necessary. VW Group currently has 12 brands ranging from Ducati and Audi to Porsche, Lamborghini, and Bentley.
A restructure of the automaker's brand lineup would provide a "clear focus on the core business," Diess said. That business is making money, and the executive noted the group needs to focus less on volume and more on profit margins.
Diess singled out the luxury brand Bentley, noting it sold 10,000 cars last year yet didn't make a profit. "I'd rather have 5,000 deliveries and a return of over 20 percent."
With a radical shift in the industry comes a necessary radical rethink for those in it. "The storm is just beginning," said Diess.
