Volkswagen CEO: Software is the next big challenge

The transition for Volkswagen cars becoming fully connected will be more challenging than the advent of electric powertrains, according to Volkswagen Group CEO Herbert Diess.

“We have the transition of drivetrains becoming electric," he said. "We want to be emissions-free and CO2-neutral by 2050. We have a plan and EVs are coming and they’re connected. That’s all nice. 

“But the next transition [to software] will be harder for us. It’s really skills we don’t own today. We have to create an entirely new set of skills and capabilities because the change into software is really radical for us. The car becomes an internet device that’s probably more complicated than a smartphone. We are only at the beginning.”

Volkswagen Group has recently appointed Christian Senger to a new position of board member for software, demonstrating how important this area is for the firm. “We’re making a big effort [in this area]," said Diess. "This is also the preparation for autonomous driving. It only works if you have cloud capabilities, data connections.”

Talking at a press conference with Microsoft, with which it has recently announced a partnership, Diess said that there is currently 10 million lines of code in cars, but such a number is small compared to what's to come. “Software capability is very limited today. In 2025, we will have three times more software in a car, and with autonomous driving, it will be 10 times more.”

He added that the differentiation between cars will be through software. “We have to become a software company, but it’s a long way away.”

Car firms are increasingly pairing up with third parties for their technology capabilities as the automotive industry evolves from a traditional car business model to one where technology is at the forefront of the services that are offered.

However, Diess said its choice to work with Microsoft was in part because it is a business-to-business company. “They don’t compete with us for the attention of the customer," he said. "They are trying to make us work and they will have a benefit from marking this happen.”

VW Group-owned Seat announced earlier this week that it would open an in-house software branch in the next 12 months. Digital officer Fabian Simmer told Autocar UK: “We should keep this know-how [in-house] and this is a means of differentiating us from other brands. When we’re looking at vehicle software or mobility services, why would we give that to a third party?”

Talking about the arrival of autonomous vehicles, Diess said he remained conservative. “I would say people are more conservative than they were two years ago on this. It will take a while. It really requires a lot of safety because you can’t risk lives with a machine. We have to be cautious. There’s a lot going on, a lot of development. I’m trying these cars worldwide. They are evolving and getting better but there’s still a lot to do.”