Volkswagen is the anti-Tesla, and China is to blame – POLITICO

VW isn’t the only German brand struggling in China — BMW and Mercedes face similar headwinds, but their premium status gives them a bigger advantage than a mass-market brand with smaller margins.

The foundation of an EV’s success, or any car for that matter, in China is the software and technology behind it. Diess, in turn, saw where China was headed and in 2019 launched Cariad, Volkswagen’s software division, with a multi-billion-euro budget and 6,500 employees in Germany.

But Cariad has been plagued by delays and false starts since its inception, threatening Volkswagen’s transformation from a company dominated by combustion engines to an EV software competitor. Cariad reported an operating loss of €2.4 billion in 2023.

VW’s first software-defined EV, the ID.3, was supposed to usher in a new era for Volkswagen, but it has faced delays and unexpectedly high costs. The same problems have plagued other VW brands, Audi and Porsche, whose models are more than three years behind schedule.

“The ID series was supposed to be the game-changer for them,” said Colin McKerracher, head of clean transportation at BNEF. “If they had a home run (with the series), it would be a completely different conversation.”

As its internal unit floundered, Volkswagen turned to partnerships, most recently with U.S. EV startup Rivian. VW invested $5 billion in Rivian to create “next-generation software-defined vehicle platforms” for both companies’ electric vehicles, according to a press release.