Volkswagen's software business has gone wrong again recently.

Several electric flagships from Audi, Porsche and Bentley have faced delays and launch delays due to slow progress in Volkswagen Group's software unit CARIAD, Automotive News Europe reported.

Sources told European media recently that Audi's new project Artemis is not expected to hit the market until 2027, three years later than planned. Porsche's new electric version of the Macan and Audi Q6 e-tron, which were planned to be launched next year, are also threatened by product delays, mainly because the software can't keep up.

In addition, Bentley's plan to sell only pure electric vehicles by 2030 has added uncertainty as progress on the CARIAD project lags behind expectations.

Just two weeks ago, the management of Volkswagen was put under pressure by the group's supervisory board. German "Der Spiegel" revealed that Volkswagen's supervisory board will ask the management headed by Hebert Diess to submit a new strategic plan to reorganize the development ideas of the software business, because this directly affects the actual process of electrification transformation.

"Bad banks" urgently need surgery

People familiar with the matter told Automotive News Europe that the Audi Artemis project originally planned to launch a high-end self-driving pure electric new car in 2025, but because the software business is not as good as expected, the first production car currently internally code-named Landjet is likely to be delayed. It won't launch until the end of 2026, or even 2027.

In addition, due to insufficient software support, the Audi Landje project has abandoned the version 2.0 software system developed by CARIAD and adopted the temporary 1.2 software solution as Plan B instead. Version 1.2 is a compromise, and according to sources, even with the unplanned Plan B, the development and mass production of the new car has fallen far behind expectations.

According to Volkswagen's previous R&D plan, Software 2.0 will be applied to most of the group's future electrified new cars, but considering that the project has not progressed substantially, the management has decided to temporarily hand over the R&D dominance of version 2.0 to the Volkswagen brand, the software department CARIAD undertake its auxiliary work.

The software division cannot play a leading role in the core business, which is a difficult challenge for head Herbert Diess. Halfway through 2022, the executives of the two major brands Porsche and Audi are very dissatisfied with the project delay caused by the software. The top leader Diess himself has repeatedly admitted in public that software development is not easy, and the project will take time to advance.

Volkswagen regards its software subsidiary CARIAD as "the most ambitious core project", which is related to the group's life and death in the next ten years or even decades. The trouble not only affected the delay in the delivery of the heavy-duty models, but also caused Diess, who was dancing in shackles, to fall into even greater troubles.

Because the business is progressing too slowly, CARIAD CEO Dirk Hilgenberg said in early July that the division will be streamlined in the second half of the year. Before Hilgenberg took over as CEO, Volkswagen employees called CARIAD a "bad debt bank". There were many internal problems, and it was difficult to clear the "bad debt" in a short period of time, with a series of transformation risks.

"The era when everyone has the same roles and values ​​has passed. We must establish a clearer task distribution and adjust the structure to promote faster research and development." He once told German media in an interview that, in essence, only 10% of the problems with mass software are technical, and the remaining 90% are cultural.

Most of CARIAD's original member structure was "transferred" from brands such as Porsche, Volkswagen and Audi, and the remaining few came from Tesla and SAP. This means that the company actually brings together dozens of corporate cultures in a short period of time, from different automakers and even different industries, and in this complex cultural melting pot, things are not going as smoothly as expected.

VW's root causes are behind the scenes, and the software business is no exception. Not only that, Volkswagen's software business is the most important aspect of this manufacturing ship that can analyze the influence of "behind the scenes" on the "front desk".

The only solution is to introduce organizational change.

At the beginning of its establishment, CARIAD's management system and structure were formulated with reference to the Volkswagen Group. This kind of "copy and paste" of the traditional model is not applicable in the software field. In the past two years, CARIAD has abolished all the institutions with the same name as the group, and has continuously reduced ranks in an attempt to become faster in decision-making.

These changes were strongly supported by the group's leader, Herbert Diess. He was a fan of the concept of flat management, but what he did not expect was that the factional struggle and internal friction within the group would once again be staged in the software department.

Is the Chinese market a "prescription"?

Bloomberg reported last week that Volkswagen is planning to launch a new round of investment in the Chinese market, including hiring thousands of new software engineers and using software as the key to breaking ground in the country.

Herbert Diess, CEO of Volkswagen, also said that the increase in China is to catch up with competitors in the field of digitalization and intelligence. Judging from the current competitive situation, it is not enough to hire software talents from other companies. The company may Accelerate the cultivation of localized talents in China.

More and more joint venture brands realize that the reason why Chinese car companies like Wei Xiaoli and BYD can "wrench the wrist" with Tesla in the field of electric vehicles is that one of the advantages is the advanced level of software and intelligence. Diess has now made software a top priority for differentiation, often citing Nokia's failure to keep pace with Apple as a warning of the company's transformation.

"Welcome to Bad Banking."

Hilgenberg recalled that when he first took over CARIAD, his colleagues always used "Welcome to the bad bank" to make fun of the difficulties of the business. It's clear that Volkswagen's long-standing unresolved software problems were crumpled up by management, packaged and thrown into CARIAD, waiting for Hilgenberg to clean up those historical issues and get the software business back on track. .

At present, CARIAD has only been established for two years, but the board of directors has been replaced more than once, and around the project leadership, Diess and his cron Hilgenberg personally took the lead, winning the battle to defend the interests of this core business.

From the perspective of the current strategic plan, Diess's remodeling of the software business, on the one hand, is to restructure the German headquarters and downsize the business, on the other hand, it continues to bet on the Chinese market, allowing CARIAD to set up its Chinese subsidiary, and Let China be the new export of its software game.

The local team will promote the development of software products for Chinese consumers, including jointly developing a unified and scalable new software platform with CARIAD headquarters, advanced driver assistance systems and autonomous driving, as well as next-generation intelligent interconnection functions.

Last year, Volkswagen announced that it would expand its software development team to 10,000 by 2025, and at the earnings call in March this year, Diess said it planned to add 1,000 software development engineers in 2022, raising the total to 1,000. 6000.

As a radical reformer, Diess knows the real situation of Volkswagen's software better than anyone. At least compared with Tesla, its rival with Silicon Valley genes, Volkswagen does not have a "geographical" advantage in software——

Because the land of Europe, even Germany, which has always been a leader in car manufacturing, has lacked the soil for IT talent training in recent years. So, will China be the new "prescription" for Diess to save the software dilemma?