How Volkswagen's ID.3, the automaker's long-awaited answer to Tesla, was beset by faulty in-car software, prompting a reboot of the company's software business
Faulty software set back a bid by the world's largest car maker for electric-vehicle dominance Tweets: @kushalbhagia , @doubleeph , @wsj , @nicolasmagand , @hardmaru , @wsj , @davidmwessel , @tomgara , @ue , @jboogie , @voltequity , @patrickc , @adamnash , @teslany , @jackkramer , @rachelkonrad , @nalanpog , and @patrickmcgee_ Tweets: Kushal Bhagia / @kushalbhagia : Tesla's astronomical valuations may have less to do with its own growth story and more to do with the fact that it's now been 9 years since the Model S launched and no other car company has a product that even comes close it it. https://www.wsj.com/... Tyro / @doubleeph : Good article on how VW is struggling to become Tesla. Summarised by this line - “You can't just flip a switch and be a software company” https://www.wsj.com/... @wsj : Volkswagen, the world's largest car maker, has outspent all rivals in the auto industry's bid to beat Tesla. What they didn't consider: Electric vehicles are more about software than hardware. https://www.wsj.com/... Nicolas Magand / @nicolasmagand : Interesting story, even if I find it kinda short-sighted: barely any mention of Porsche's efforts (subsidiary of VW) with the critically acclaimed Taycan, neither of other manufacturers: Jaguar (the I-Pace won World Car of the Year in 2019), nor Hyundai/Kia's efforts, also good. https://twitter.com/... @hardmaru : “You can't just flip a switch and be a software company.” https://www.wsj.com/... @wsj : Volkswagen made the auto industry's biggest bet on electric vehicles. But when its car rolled off the assembly line, it didn't work as advertised. “Maybe we underestimated how much work is involved.” https://www.wsj.com/... David Wessel / @davidmwessel : WSJ's Bill Boston @BerlinDiary how Volkswagen's big bet to keep up with Tesla in the e-car business hit a few speed bumps. Well reported, well told. https://www.wsj.com/... via @WSJ Tom Gara / @tomgara : Really interesting piece on how badly VW is struggling with producing electric cars. Launched its flagship model last year with a ton of bugs and bricked features, still unable to do table stakes stuff like over-the-air software updates https://www.wsj.com/... https://twitter.com/... Unearthed / @ue : Faulty software set back a bid by the world's largest car maker for electric-vehicle dominance https://www.wsj.com/... Jeff Gothelf / @jboogie : “What they didn't consider: Electric vehicles are more about software than hardware. And producing exquisitely engineered gas-powered cars doesn't translate into coding savvy.” Manufacturing ≠ software https://www.wsj.com/... Volt Equity / @voltequity : It isn't easy for an industry that has regularly outsourced tech for all of its existence to suddenly be good at making software. https://www.wsj.com/... Patrick Collison / @patrickc : Great example of how hard it is to reliably turn capital into good software: https://www.wsj.com/.... Software is half “building a bridge” and half “making a movie”. Adam Nash / @adamnash : There is a persistent belief at old economy companies, going back decades, that software is a commodity. They believe that if you just spend $ on engineers, you can match anything in market. Looks like @VW is the latest to discover that isn't true. https://www.wsj.com/... Tesla New York / @teslany : How VW's $50B Plan to Beat Tesla Short-Circuited ⚡️💻 “EVs are more about software than hardware & producing exquisitely engineered gas-powered cars doesn't translate into coding savvy.” “You can't just flip a switch & be a software company.” https://www.wsj.com/... $TSLA #EV Jack Kramer / @jackkramer : .@Tesla success was a deep blow to Germans' national pride as best carmaker in the world. The envy was real. @VW is catching up — Clear electric #2 behind Tesla. But it's lagging in the techy part - software. https://www.wsj.com/... Rachel Konrad / @rachelkonrad : Easily the best article on how and why incumbent carmakers are desperately trying and failing to catch up to @Tesla, as told through the lens of @VWGroup's EV CF. Bravo to @berlindiary and the @WSJ for giving this subject the room it deserves. https://www.wsj.com/... Nicholas Poggioli / @nalanpog : “You can't just flip a switch and be a software company.” How Volkswagen's $50 Billion Plan to Beat Tesla Short-Circuited https://www.wsj.com/... Patrick McGee / @patrickmcgee_ : Great quote on the challenges for incumbent automakers - who these days design the vehicle and orchestrate production but only account for maybe a quarter of what's in the car. https://www.wsj.com/... https://twitter.com/...
Context & Ripple Effects
The ID.3 was supposed to be Volkswagen's proof that the world's largest carmaker could match Tesla in electric vehicles; instead it shipped with faulty in-car software that left features failing, forcing a reboot of the company's software business. The follow-on coverage shows how deep the problem ran: a $30B software push was itself hampered by internal battles, technical glitches, and a complex structure.
First-order effects
- Volkswagen released the ID.3 with software so faulty that features failed in customer cars, directly undercutting the model positioned as its answer to Tesla.
- The company rebooted its software business in response, an admission that its existing organization could not deliver competitive in-car software.
Second-order effects
- Tesla's software engineering depth became a compounding advantage beyond the showroom: it navigated the global chip shortage by rewriting software to use alternative chips, a move VW's fragmented architecture could not easily replicate.
- With cars carrying 100-150+ chip-based electronic control units each, suppliers and carmakers face rising integration complexity that punishes exactly the kind of structural sprawl VW's reboot exposed.
Third-order effects
- The pattern persists across the industry: years later, a Toyota Woven engineer described the company's new Arene platform as "full of bugs", evidence that legacy carmakers remain structurally behind Tesla and Chinese EV brands in software rather than having caught up.
- If hardware-first incumbents keep struggling to rebuild as software organizations, EV competition consolidates around whoever owns the software stack, with laggards dependent on partners or acquisitions to close the gap.
The trend: Legacy automakers' hardware-era structures are proving unable to match Tesla's software velocity, turning in-car software from a feature into the deciding axis of the EV race.