How VW fights with the software

"Anyone who just tuned in to the opening of Volkswagen's virtual shareholder meeting on Thursday should think: There is a successful car company that, with its brands from Audi to Porsche to VW, is mastering all the great challenges of the time with ease. Hans Dieter Pötsch, the head of the supervisory board, explained with his inherent calm that "great progress" had been made in the transformation to a tech company. Herbert Diess, the CEO, listed the successes of the past year. With sales of EUR 250 billion and a group-wide operating margin of around eight percent, the company is financially robust. Profits are finally back in the USA, autonomous taxis are supposed to be driving in Hamburg in 2025, and the Porsche brand is already showing that electromobility works: the new Taycan electric model is now selling better than the iconic 911. And so it will continue, said Diess, the group will push ahead with the conversion "powerfully". "Our teams want to change the world of mobility."

The list of successes and the lack of discussion with the shareholders hide the fact that Volkswagen is once again in some turmoil. As always in the Diess era, it is sparked by questions of style, but this time it is also about really serious, even existential, as everyone in the group says. The lack of success in the core market of China is one thing. The question is: what about the software? The core of a car of tomorrow or the day after tomorrow at the latest, far more complicated than a smartphone.

Bringing the software development into the company takes about 15 years

Diess wants to have the operating system written for it by the VW Group, but that is proving difficult, partly because two variants have to be developed in parallel. One should be ready in the coming year and the really good one in the middle of the decade, tailor-made for the then fully developed hardware "kit" with which all brands build their cars. "Bringing the software development completely into the company is a completely new approach that will take two life cycles," says the CEO. "In the automotive industry, that's 15 years." 

Important decisions were made last year and implementation is now under way. But the complexity and size of the group make what is already a big undertaking even more difficult: Audi used to be responsible for programming and also the commercial vehicle division, but now a newly founded VW software company called Cariad is centrally responsible. But because things are still running slowly, Porsche is now tinkering with its own code again, otherwise the start-up of the Macan will not work. And so forth.

Away from bending metal: Diess has set the priorities, hardly anyone contradicts him when he names the biggest competitors of tomorrow and the day after tomorrow: mobility service providers like Uber, the iPhone manufacturer Foxconn, which now also wants to build cars, possibly also for Apple. And of course Tesla. 

But what about the implementation, the answer, various critics in the VW group ask: Diess is in charge of Cariad, so he should really take care of it, the fate of VW depends on it. Instead, however, he is getting bogged down again, some say: in the USA he wants to build a new electric car brand called Scout. Leading Porsche and Audi back to Formula 1. He wants to rename the group and the Seat brand as well. The fact that he argues with a rather ruthlessly software error analysis, which was commissioned by those he is now criticizing, is not well received within Volkswagen either.

Not outside the group either. VW is a pioneer in green electromobility, says Janne Werning, an analyst at Union Investment. But the bad group structures are "still the Achilles' heel". His colleague Ingo Speich from Deka Investment puts it this way: "The good result of the VW Group belies the home-grown problems." The company management does not correspond to the level of a Dax group."