VW is not the only German brand struggling in China — BMW and Mercedes are facing similar headwinds, but their premium market status gives them more of a buffer than a mass-market brand with smaller margins.
What underpins successful EVs, or any car in China, is the software and tech behind it. Diess, for his part, saw the direction China was taking and launched Cariad, Volkswagen’s software unit, in 2019 with a multi-billion euro budget and 6,500 employees in Germany.
From the start, however, Cariad was plagued by delays and false starts, endangering Volkswagen’s transition from a combustion engine-dominated company to a software EV competitor. In 2023 Cariad posted an operating loss of €2.4 billion.
VW’s first software-defined EV — the ID.3 — was meant to kickstart the new era at Volkswagen, but faced delays and unexpectedly high costs. The same issues plagued other VW brands Audi and Porsche, which have models that are more than three years behind schedule.
“The ID series was supposed to be what changed it all for them,” said Colin McKerracher, head of clean transport at BNEF. “If they’d had a home run [with the series], this would be a very different discussion.”
With their internal unit flailing, Volkswagen turned to partnerships, most recently with American EV startup Rivian. VW invested $5 billion in Rivian to create “next-generation software-defined vehicle platforms” for both companies’ EVs, according to a press release.