Health check: What's changed at VW Group's software division?

Under-resourced for any one task and pursuing all simultaneously, Car.Software consistently missed deadlines, bringing itself into conflict with the highly structured and schedule-oriented manufacturing arms of all the group’s brands. The Volkswagen ID 3 made its debut with key infotainment and functionality features lacking at delivery to customers, as did the later ID 4. The promised rectification of vehicles already in customer hands happened slowly and there were many missed delivery dates along the way. Porsche and Audi fought with the software newcomers intensely. Both premium brands ultimately rejected the common OS 1.0 in favor of vehicle operating systems developed in-house.

A name change to Cariad accompanied by a personnel reshuffle in March 2021 failed to fix the problems between software developers and automotive manufacturing staff. Diess’s original plan for Cariad was to have an agile software development and implementation cadre within the Volkswagen Group, aiding the group’s transformation from legacy automaker to a maker of digital products, services and software-defined vehicles. Diess had seen how vertically integrating software development into the process of manufacturing cars made the vehicles more technically advanced and profitable from interviewing for the job of CEO at Tesla before becoming CEO at Volkswagen.

Cariad’s internal delays, missed goals and inability to deliver working software crippled the rollout of the ID 3 and ID 4 under Diess. Ultimately, issues between Cariad and premium brands Audi and Porsche resulted in the delay of the all-electric Macan and the Audi Q6 E-tron until late in 2024. These delays, with their associated costs in the millions of euros, were the final straw in a continuing power struggle at VW and cost Diess his job in late July 2022.

Within hours of the Bosch announcement, word leaked of Porsche’s impending partnership with Israeli automated driving software developer Mobileye to help develop Volkswagen’s faltering ADAS, scheduled to make its debut in the now-delayed PPE-platform vehicles. It is safe to assume that Blume, as CEO of both Porsche and the Volkswagen Group, was intimately involved in the decision to cooperate with Mobileye for future ADAS features.

Blume’s direction for Cariad is clear. For the foreseeable future, Cariad will not operate independently inside the larger organisation to develop a bespoke VW operating system. Nor will Cariad spearhead the transformation of the Volkswagen Group into a digitally driven organisation, as Tesla is now. Instead, Cariad will manage a number of collaborations with outside software suppliers, such as Mobileye. Installing a manufacturing expert in the person of Peter Bosch as Cariad’s CEO signals that Volkswagen will treat software as a component of the vehicle. Software and its uses by the occupants will not be the key criteria that will define the vehicle during the design phase. Volkswagen is effectively relinquishing its lead among legacy OEMs in the transition to a product lineup of software-defined and digitally enhanced vehicles.

Balanced against that sacrifice is the need to get products out the door and continuing to generate revenue. Even now, ID 3 and ID 4 vehicles in customers’ hands cannot receive updates over the air (OTA). Rivals BMW and Mercedes-Benz are now digital peers with Volkswagen, with their partners providing the bulk of digital development towards products and services delivered through co-produced or contracted operating systems.

Volkswagen Group CFO Arno Antlitz has confirmed that Cariad’s OS 1.2 will roll out with the electric Macan and the Q6 E-tron next year. OS 2.0, which should allow for Level 4 autonomous driving, will not make its debut in 2025, as originally planned, but in 2027 or 2028. OS 2.0 will be incorporated into key premium models from Porsche and Audi well after their launch on the PPE platform and not at the platform’s launch as initially intended.

Blume knows that revolutions take time and money, even if they’re digital in nature. Securing the future of the group’s electric vehicle platforms and product rollouts means that Volkswagen will live to fight another day.