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The Volkswagen Group’s Cariad software division has known almost nothing but controversy in its nearly three-year life.

Formed to shoulder the burden of creating a digital future for the group’s still fairly analogue fleet in the teeth of competition from the likes of Tesla, it became the public face of the failure to ship working software with the first Volksagen ID 3 electric cars.

The troublesome software was called 1.1, and fixing that has not been easy. ID Software Update 2.0 was designed to fix issues for the affected MEB-platform electric cars but put pressure on the cars’ weak 12V batteries. After VW replaced them with beefed-up versions, Cariad late last year pushed out update 3.0 that is said to finally allow the full suite of over-the-air updates promised from the off.

Meanwhile, as all that was happening, work on the posher 1.2 software aimed at Audi and Porsche cars on the upcoming PPE (Premium Performance Electric) platform got delayed. That knocked back the launch of the Porsche Macan EV by a year. 

If that wasn’t bad enough, Porsche took issue with the fact that Cariad was developing a third software platform designed to replace the first two, initially scheduled for 2025 and forming part of the new Unified platform that would eventually replace both the MEB and PPE – underpinning all future electric VW Group cars. 

Porsche complained in its share prospectus published ahead of its part flotation last year that the development of this 2.0 stack “could potentially allocate greater development capacity and resources to the detriment of further development of the E3 1.2 platform”.

Then in July, VW Group CEO Herbert Diess resigned, with some business outlets in the group’s native Germany reporting that it was his failure to sort the software issues that forced the supervising board’s hand.

Since then, new VW Group CEO and Cariad chairman Oliver Blume – previously Porsche CEO – has pushed for a change in the way Cariad operates, resulting in a more streamlined approach. Dirk Hilgenberg, Cariad’s CEO since 2020, acknowledged that even with 5566 employees as of the end of 2022, it was trying to do too much. “We need to do the software platforms, the driver stack as well as the digital [infotainment] experience and we had three releases being developed in parallel,” he told journalists at the CES tech show held in Las Vegas early January. “But we are now not promoting that differentiation any more. Now we try to find the synergies [between 1.1, 1.2 and 2.0].”

What VW under Blume has done with Cariad is give it the power to say to the group brands: we set the pace, not the other way around. “What used to be done was that the SoP [start of production] of vehicles was paramount and the governing principle,” Hilgenberg said. “That's now changed.” So now when a new car is being developed, the brand goes to Cariad and says ‘what have you got?, rather than ‘we’re launching Q2 2024 and you’d better be ready with something hot!”

Cariad is now essentially calling the shots in terms of release dates and platform launches. "Cariad is in the driver's seat and the VW brand is in the passenger seat – with Audi and Porsche on board," Hilgenberg said of release of 2.0 back in July in an interview with Frankfurter Allgemeine Zeitung newspaper.

The fact that it took Volkswagen so long to give Cariad the clout it needed within the group wasn’t surprising, argues Pedro Pacheco, senior research director at consultant Gartner. “Legacy companies need to undergo a heavy transition and that’s usually a big problem,” he told Autocar. “Software is going to be central to the success of the whole company. If Cariad and other software organisations from legacy car makers don’t manage transformation fast enough, then the newcomers will take over.” Pacheco pointed to the fact that Tesla almost overtook Audi to become the third largest premium car maker in 2022.

Despite all the teething troubles, the VW Group is adamant it wants full control of the software rather than outsourcing it. In fact, an earlier agreement with Intel’s Mobileye unit to supply the chip powering the MEB cars’ assisted driving system was a big reason for Cariad’s existence. That agreement gives Mobileye sole access to the data from the cars, which then goes to populate its REM (Road Experience Management) database to digitally map roads and pave the way for greater levels of autonomous driving. “That's a contract the Volkswagen brand did prior to Cariad. That's why Cariad was founded, because we are not having access,” Hilgenberg said in Las Vegas.

VW and Cariad realised they needed that data if they wanted to gain the knowledge to offer level three and level four hands-free driving capability on cars built on the Unified platform. Cariad reckons it’ll have 40 million cars on the road harvesting data by 2030, creating knowledge about all those rare ‘corner cases’ in driving that we humans can usually figure out how to navigate, but a computer might not. 

“The functionality is dependent on the amount of corner cases you actually can secure, harden and validate, and that needs a big fleet and high-performance power,” Hilgenberg said. Which means that for the Unified platform, Mobileye is out and chip supplier Qualcomm is in. One advantage Qualcomm has is that its chips can power both the assisted driving functions and the infotainment, as well as letting VW keep its data.

Cariad’s goal is to write more of the software itself, up to 60% by 2025 from around 10% now. It is recruiting hard and Hilgenberg says Cariad will hire another 1700 staff in 2023 to take its headcount over 7000 across its locations in Germany, China, the US and India. 

The CEO said his company receives 7000 applicants a month and is benefiting from the mass layoffs at US tech giants such as Google and Facebook.

One way it grows is through acquisition, such as the 2022 purchase of Intenta, a sensor data fusion company. In 2021, it bought the camera software division of Hella Aglaia. Cariad also has a wealth of partnerships outside the key chip makers. The premium infotainment software within the 1.2 platform going into the PPE cars is being developed on the Android Automotive open-source operating system. Cariad has formed a majority-owned joint venture in China with Horizon Robotics to develop assisted driving systems for the country, meaning it has split its strategy to avoid problems around data leaving the country (illegal in China). 

Meanwhile, after VW removed itself from the Argo AI self-driving enterprise, the weight of developing more saleable (ie achievable) levels of autonomous driving fell to Cariad and its partner Bosch under the Automated Driving Alliance. The partnership now has 750 people from each company, 1500 in total, working on hands-free technology.

All this change within Cariad means timelines have slipped. The previous target of 2025 for the 2.0 software aimed at the Unified platform and the cars that were meant to herald its arrival, including the VW Trinity flagship EV, have dissolved with no new date set. It’s still uncertain if cars on the PPE platform (sometimes called SSP, for Scaleable Systems Platform) including the Macan EV and new Audi A6 E-tron will use the 1.2 software or be fitted with the latest iteration of the 1.1.

Cariad's next major release of the ID software will coincide with the market launch of the Volkswagen ID 7, the electric saloon that VW teased at CES and is expected on sale in the autumn following a reveal in the spring. The timing incidentally shows how hard it is to ignore vehicle launches when rolling out major upgrades.

The prize for getting it right is immense. VW has said it expects software-enabled sales to expand to €1.2 trillion (£1.06 trillion) globally by 2030. How much of that legacy makers like VW can tap into depends on how fast they reorganise themselves, reckons Gartner’s Pacheco: “There’s a very short runway to take off. If you don’t take off, you just crash.”