Volkswagen and Amazon Team Up to Create an Industrial Cloud

March 27, 2019, 12:18 PM UTC

The world’s biggest carmaker and the everything store are teaming up.

Amazon (AMZN) and Volkswagen (VLKPF) announced a new global, multiyear partnership Wednesday morning to create an industrial cloud for the automaker’s 122 facilities, with the intention of making the platform available to others.

Amazon Web Services will power the Volkswagen Industrial Cloud, which will connect all machines, plants and systems in the group’s global facilities, including subsidiary brands such as Audi and Porsche. Longer term, the Volkswagen Group could also integrate its global supply chain of more than 1,500 suppliers and partner companies, which have 30,000 different locations. Negotiations with major industrial companies interested in migrating to the Volkswagen Industrial Cloud are already in progress, the companies said.

Amazon Web Services CEO Andy Jassy added in a statement that the Volkswagen industrial cloud “will reinvent its manufacturing and logistics processes.”

The automaker’s aim is to standardize and network all production-level machinery, equipment and systems, which currently operate with IT differences. The Volkswagen Industrial Cloud aims to standardize and simplify data exchange between systems and plants, helping VW to optimize operations by anticipating and avoiding bottlenecks.

Volkswagen and Amazon Web Services will have about 220 specialists working on the project in several German cities as well as in a future joint Industrial Cloud Innovation Center in Berlin. They aim to put the Industrial Cloud and its first functions into operation by the end of 2019.

The move is part of a critical moment for Volkswagen, where CEO Herbert Diess has been pushing for more efficiency and innovation. Last year, Diess said VW must improve its production efficiency — outside of China — by 30% by 2025. Earlier in March, VW said it would cut up to 7,000 jobs by 2023 to free up €8 billion ($9 billion) in cash for research and development. The week before that, Volkswagen said it aims to produce 22 million electric cars over the next decade, an increase of almost 50% from its previous goal.

The auto giant is also under pressure to cut emissions across its brands as new EU regulations set increasingly ambitious targets. The Volkswagen Group sold a record 10.8 million cars last year, but just 40,000 of these were electric. At the same time, VW is still recovering from Dieselgate, with the U.S. Securities and Exchange Commission filing a new lawsuit against the company earlier this month.

Just this week Diess posted a selfie with Amazon CEO Jeff Bezos on LinkedIn from the MARS Conference in Palm Springs, writing he was “looking forward to shaping the future together.”

Although Amazon is best known for its e-commerce, the web services division has become the dominant cloud provider. Jefferies analyst Brent Thill estimated in November that AWS revenue will reach $71 billion in 2022, which would give the division a valuation of about $350 billion.