Rumoured VW Spin-Off Parts Company Could Lower Costs, Boost EV Development

Volkswagen is rumoured to be planning a new car parts business, in order to lower costs, boost profitability and allow the company to divert funds towards the company’s EV products.  

Reuters reports, that analysts predict structural change is finally happening at VW, while others have said the efforts will grow equity and streamline the component production business in the medium term.

Ferdinand Dudenhoeffer, Head of the Centre of Automotive Research at the University of Duisburg-Essen commented, “The (components) realignment shows that structural change is happening at last,”

He added, “This could be the first meaningful step toward clarifying the profitability of VW’s supplier activities as well as a spin-off of the business. It could be a boon to VW’s profitability though details remain to be seen.”

London-based J.P. Morgan analyst Jose Asumendi said in a note quoted in the report – this could be a game changer for VW's equity story, adding that the move entails a growing likelihood that VW will spin-off or streamline components in the medium term.

Restructuring or creating a separate parts entity would allow VW to circumvent the company’s powerful labour unions, and produce components such as gearboxes at other sites with lower labour rates.

The move also ties in with the company’s efforts to streamline its business model, after announcing its major EV push last year and offloading non-automotive brands – such as Ducati.

Under its ambitious EV plan, VW plans to retail at least more than 30 new electric vehicles by 2025 and increase the ratio of EV sales to 25 percent of group sales. This is to counter up-and-coming EV automakers such as Tesla and shore up against mobility services such as Uber.

Separately, Reuters reports that in a statement on Wednesday, VW plans to “bundle in” the manufacturing of parts, engines and transmissions at 56 plants, spread across five continents with a total of 80,000 staff.

The effort would see the company organise production activities, strengthen in-house competencies where required and push forward the transition to EVs throughout the VW group.