VW – Solo: a car wars story.

Google & Co. out. Rivals in.

• VW has confirmed its solo strategy when it comes to vehicle software, but it will need co-operation with other vehicle makers if it wants to make the most of its data and for that data to remain independent of Google & Co.
• To reach this lofty goal of software independence, VW has set up a subsidiary known as Car.Software which will be responsible for all vehicle software for all 12 vehicle brands to which VW has committed €7bn.
• The target is to develop 60% of its own software in house by 2025, presumably rising to 100% over time.
• This approach is already suffering from significant teething problems as the Golf 8 and the ID.3 have both suffered from significant software issues which have delayed their availability to the market.
• This is to be expected as software is much more difficult than it looks and the right approach to developing software in-house is very different from making metal boxes and then forgetting about them when they leave the factory.
• These kinds of problems are not unexpected with an undertaking of this size and when it comes to the internal plumbing, I think VW will get it right in the end.
• However, what is not so straight forward is the user experience, the data and the ecosystem which its cars will increasingly need to be built around in the future.
• It is here where VW is really going to have difficulty and where Google & Co’s advantage it at its strongest.
• I see no requirement for VW to build all of this piece itself but at the very least, it must be an enabling partner in the process.
• Furthermore, to get this right the whole mindset of VW has to change so that it builds a positive relationship with the users who drive its vehicles because this is the route to being able to monetise the data that its vehicles generate.
• This requirement goes way beyond the Car.Software division meaning that the whole company, not just the software division, needs to focus on its real customers, the users.
• Outside of the pandemic, the automotive industry still faces a great challenge which is the potential 65% decline in vehicle demand following electrification and autonomous driving over the next 20 years.
• Without revenues to plug the gap caused by falling vehicle demand, the existence of most, and potentially all, vehicle makers is in doubt.
• The lead contender to fill this gap is digital services which means that the OEM needs to be present somewhere in the value chain.
• This is why Google Automotive is so dangerous to the OEMs because it will mean that the OEM is largely excluded from the vast majority of the available market and is left with the crumbs that fall from Google’s table.
• However, this puts huge pressure on the OEMs because Google’s services are excellent, used by a huge number of users and command significant loyalty.
• I do not think that the OEMs need to provide all or even any of the services that users purchase for use in their vehicles, but they have to be at least an enabler with either the data or a platform.
• When it comes to platforms and data, VW will need to have some form of cooperation with the other vehicle makers as while it is a big vehicle maker, it has only 11% global share.
• The real value of digital services will only be realised when VW has access to the data of others and is sharing its own data in return.
• This is where I suspect the sticking point will be found.
• OEMs tend to think of data as their own private revenue opportunity and fail to realise that the revenue that they can generate will be much greater if the data is shared as opposed to keeping in a series of isolated vaults.
• If data is shared, then RFM calculates that even with a relatively small share of the overall revenue, there will be more than enough profit generated to make up for the profit lost to falling vehicle sales.
• VW often professes to onboard with this idea but its actions to date leave me unconvinced that it has really taken this to heart and is acting upon it.
• I hope this situation changes as VW’s long-term status as an independent company may depend upon it.