Inside Volkswagen's $30B plan to boost its software efforts, to compete with Tesla, hampered by internal battles, technical glitches, and a complex structure
Christoph Rauwald / Bloomberg : Tweets: @johnfraher , @crtrud , and @hyper_drive Tweets: John Fraher / @johnfraher : Can Volkswagen learn how to code? Nice piece on how the car giant is trying to beat off Tesla, Apple and the rest of Silicon Valley from @Rauwald https://www.bloomberg.com/... @business @hyper_drive Craig Trudell / @crtrud : “It requires a quantum leap for automakers to close the gap to Tesla when it comes to software.” @Rauwald on the culture change Herbert Diess is trying to implement at Volkswagen and the structural issues standing in the way. https://www.bloomberg.com/... Bloomberg Hyperdrive / @hyper_drive : VW is an auto-industry icon, but it's now pitted against companies that have routinely disrupted industries, casting former leaders aside in the process https://www.bloomberg.com/...
Context & Ripple Effects
The $30B bet is the escalation of a five-year arc: VW first tried to fix its software sprawl in 2019 by unifying fragmented IT efforts into a Car.Software unit building "vw.os", then set a target of developing 60% of its vehicles' software in-house by 2025. Instead, its flagship Tesla answer shipped with such faulty software that the ID.3 launch forced a reboot of the software business itself.
What Bloomberg adds is the diagnosis behind the misses: CEO Herbert Diess is fighting internal battles between the central unit and the brands, plus a corporate structure built for hardware programs, not code — while Apple and Tesla loom as competitors, not just benchmarks.
First-order effects
- Herbert Diess must force a culture change across VW's brand fiefdoms for the $30B program to land, because the reporting pins the failures on internal battles and the group's complex structure rather than money or headcount.
- Tesla's software lead becomes the explicit benchmark Diess's organization is measured against — every glitch in VW's cars now reads as evidence the gap is widening.
Second-order effects
- As VW pulls software development in-house toward its 60% target, suppliers that once owned electronic control units lose scope — a squeeze amplified by the 100-150+ chip-based ECUs packed into each modern car.
- Rivals watching VW's struggle face the same build-vs-buy choice with a cautionary example: the cost of a botched in-house stack is now visible in delayed launches and public reboots.
Third-order effects
- If the structural friction holds, the industry's endgame is not every automaker writing its own operating system but platform alliances — a direction VW itself later took when it reset Cariad around partnerships with Xpeng in China and Rivian in the US.
- Value in the car migrates toward whoever controls the vehicle software layer, turning operating-system ownership — not drivetrain engineering — into the industry's core battleground.
The trend: Legacy automakers are discovering that closing the software gap with Tesla requires restructuring the corporation, not just funding a software division — pushing the industry from in-house stacks toward platform partnerships.