In 2021, Volkswagen wanted to become a software-driven mobility provider. "Our goal is to become a software company," Laura Ros, director of the company's Spanish subsidiary, said in an interview. It was a sentiment shared by the entire company.
The time had come to change the Volkswagen, but what should have been a simple operation stalled. Although the company tried to push for innovation, the project failed.
The final impulse, the key to unraveling the matter, would come in the summer of 2022 with the dismissal of CEO Herbert Diess. Volkswagen had become a huge mess—and it's still paying for it.
A (One-Way) Ticket to China
Until the company gets results that apply to new vehicles, Volkswagen will rely on China to implement changes in its new EVs.
To understand how we got here, we first have to review the company’s strategy in recent years. When Diess left Volkswagen, the automaker was in the middle a platform chaos for new EVs that had cost billions of dollars.
Volkswagen had an electric car platform called MEB. The company will replace it with the SSP platform, which will be based on its future cars and support all vehicles, especially the most advanced and technological models. However, the automaker delayed this platform planned for 2025. As a result, it announced that Trinity, the most advanced car in Volkswagen’s history, may not be released until 2030.
Along the way, Volkswagen also had to eliminate the MQB, MLB, and MSB platforms in transitioning to EVs. However, with the SSP platform coming later, the new electric Porsche Macan and Audi Q6 e-tron needed pillars to rely on. Both cars would use the EPP platform, which was only transitional.
However, developing two new platforms is expensive, not only in terms of money, but also in terms of workforce and time. Developing new software for two new platforms—one with a hefty dose of autonomous driving—and continuing to build software for the latest models coming onto the market was too much for Cariad, the company Volkswagen set up exclusively for software development.
Five years after its birth, in 2019, Cariad is experiencing one of its lowest moments. The company has failed to deliver its work on time, which has led to the delay of models with the PPE platform. Some experts and users have harshly criticized its usability decisions. Cariad had to correct some issues, such as touch buttons on the steering wheel. In a clear cost-saving plan, it has been one of the divisions of the group that has suffered the most.
Among the measures taken, Volkswagen invested in XPeng, a Chinese electric car company known for its good software design. Like other companies, it hasn’t achieved the economic results that were expected, but it’s one of China’s most important electric car companies.
While the investment was $700 million, or 5% of the company, Volkswagen earned a seat on the board of directors, giving it some leeway to decide its future, strengthen its ties to XPeng, and get to know it better from the inside.
We now know that Volkswagen is throwing itself into the arms of Chinese engineers. Both companies have designed two workspaces in Guangzhou and Hefei (China) to develop a new electric car platform that Volkswagen will use exclusively in China with its latest launches, Automotive News reported. In addition, Volkswagen has sent “hundreds of engineers” to China.
Volkswagen hasn’t achieved the expected results in this Asian country. In 2023, BYD overtook Volkswagen as the manufacturer that sells the most cars in China, not only EVs. Volkswagen’s new vehicles don’t have the same success among Chinese customers as local cars, which are full of entertainment, giant screens, and even karaoke.
In addition, local companies launch products at a frenetic pace, quickly making vehicles already on the market seem obsolete. In this regard, one of the main goals of European companies like Volkswagen is to streamline production rates and be more agile in changing strategies.
Volkswagen also needs help understanding the needs of Chinese drivers. This isn’t the first time the company has had to rely on local engineers to adapt its vehicles to local demand. The strategy is a standard industry practice, but until now, Volkswagen has overlooked software development, opting instead for having a large division develop software for all its vehicles. It seems clear that it was wrong.
This article was written by Alberto de la Torre and originally published in Spanish on Xataka.
Image | Volkswagen
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