What Does Herbert Diess Departure Mean For Volkswagen’s Electric Future?

The recent dismissal of Volkswagen Group CEO Herbert Diess has sent shockwaves through the automotive industry – but particularly amongst those following the rise of electric vehicles. While most other traditional car company bosses have seemed ambivalent towards the EV revolution, Diess has taken Volkswagen Group strongly towards transformation. Without Diess, will Volkswagen put such a clear focus on electrification, or will things swing back to more traditional drivetrains?

Things had been going well for Volkswagen’s EV sales in volume terms. For the first half of 2022, Volkswagen managed to increase its EV deliveries by 27% compared to the same time in 2021, equating to a total of 217,000 electric cars. More than half of these sales were in Europe, but China has seen considerable growth, although US sales were clearly not doing so well. Nevertheless, a 27% growth in sales volume is commendable considering the chip shortage and general supply issues still affecting global auto deliveries, even if Tesla has been faring even better.

The rumored reason (according to Automobilwoche) for the Diess departure was a row over software. Porsche and Audi had apparently complicated the Volkswagen Group CARIAD project with special requests. CARIAD is Volkswagen’s attempt to provide a more unified software technology stack for its future cars. This will facilitate more accurate range planning and Level 4 autonomy, among many other advanced features. A connected vehicle platform is an essential aspect of the automotive future, be the cars electric or otherwise.

Volkswagen has had some well publicized issues with its software over the last few years. The launch of the ID.3 was delayed in 2020 because the software wasn’t ready, and there were features missing even when the car did arrive in 1^st Edition form. These issues date back to 2019, well before any of the ID. cars were released. Even now, if you frequent online groups dedicated to Volkswagen ID.3 and ID.4 cars, there are still problems, and It wasn’t until September 2021 that over-the-air updates became available, months later than anticipated.

Although electrification is the most obvious battle currently taking place in the automotive sector, there are a lot of parallels with the arrival of smartphones nearly 20 years ago when it comes to software too. At the beginning of the 2000s, there were a few huge behemoth mobile phone brands that seemed unassailable – including Nokia, Ericsson, and Motorola. But then the iPhone came along and changed the game entirely. From a device that was all about phoning and texting on the move, we now make jokes that our smartphones “can also make calls”, because it’s the other functions and app ecosystem that matter now. The once famous mobile phone brands have been usurped, with Apple, Samsung and a host of Android-based handsets taking over instead. They are all about the software.

There is a parallel trend brewing in cars. Electrification is only part of it. As any Tesla owner will tell you, the integrated software features are similarly important as the battery-electric drivetrain, such as the ability to arrive at a Supercharger device and just plug in. The control of the charge and billing are all taken care of automatically. This experience is in a totally different league to the frustration other EV brands experience with public charging. Being able to watch Netflix while you wait is another of the headline functions, but the integration of the satnav with charging (including battery preconditioning) and self-driving are more fundamental.

These are the areas CARIAD is intended to address. Sensibly, Volkswagen hasn’t tried to develop a car operating system entirely from the ground up. The company has licensed BlackBerry’s QNX for its advanced driver assistance systems (ADAS) and automated driving. But just as in the smartphone revolution, having a strong software foundation is a key component for success in the car industry now. Companies that don’t get on top of this alongside electrification could end up the same way Nokia, Ericsson and Nokia did in the world of mobile phones.

So CARIAD is clearly a crucial technology for Volkswagen Group, but the question remains whether its problems were the true reason for Diess leaving. Germany has one of the most strongly unionized car industries in the world, and the arrival of EVs has upturned production as much as it has the driver experience. Diess has long faced friction from the unions, and if you read the messages from labor representatives about his departure, it seems clear that they are happy this will help protect their jobs.

Diess has been replaced by Porsche chief executive Oliver Blume. On one level, this sounds promising for electrification, because Porsche’s Taycan and its variants have been a huge success, outselling the 911 in 2021. But Porsche is also exploring alternatives such as synthetic e-fuels, and there is a risk that the thrust towards EVs will be diluted by a renewed focus on e-fuels for more mainstream VW brands as well.

That would be a major worry for those who view EVs as a major part of the solution to our current environmental problems. In Q1 2022, Volkswagen Group was in fourth place globally for all-electric vehicle sales, after Tesla, SAIC and BYD. The company is just releasing the much-anticipated ID.Buzz van and has a budget ID.Life in the wings. If the company de-emphasis EVs again, it could delay the transition for the whole market. Other brands will step up, but despite its problems Volkswagen was clearly further down the EV journey than most companies other than Tesla. Herbert Diess led Volkswagen Group’s rebirth after the shame of Dieselgate, but his departure could mean a step back in the wrong direction. Perhaps it should be called Diess-elgate, in homage.