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How Volkswagen's Endless Software Headaches Led It To Rivian

"CARIAD" has six letters, but in the auto industry, it's become kind of a four-letter word.

The Volkswagen Group's in-house software division has dealt with countless delays, layoffs, reorganizations and other setbacks since its founding in 2020. Its very name has become a kind of shorthand for the entire industry's difficulties with, well, making anything that doesn't revolve around an engine and a transmission. We can't say CARIAD is throwing in the towel, but its challenges do explain why it's calling in backup from nascent EV startup Rivian.

On this midweek edition of our Critical Materials morning news roundup, we're looking back at how VW ended up needing help from Rivian, and what Rivian gets in return. Plus, General Motors' equally troubled robotaxi division Cruise gets a new CEO, and why you should get ready for the Era of Uncertainty. 

30%: CARIAD's Loss Is Rivian's Gain

Rivian Zonal Architecture

I think that yesterday's announcement of a software joint venture between Volkswagen and Rivian—which also includes the former investing up to $5 billion into the latter—requires a bit of a history lesson. And it may go back as far as Dieselgate, when the Volkswagen Group faced an earth-shattering scandal that led it to commit to one day going all-electric.

To do that, the VW Group needed, for lack of a better term, a Tesla-like approach to software and digital technology. Historically for the entire auto industry, "software" means things like engine management, or driver-facing bits like infotainment and navigation, or numerous components made by different suppliers with different software standards who often didn't talk to one another. It was piecemeal and old-school, compared to the smartphones and tablets that have become an integral part of our lives over the past two decades.

That doesn't work in a world where cars will be defined by over-the-air software updates and downloadable, paid features that can mean new revenue sources. Or EV battery management. Or DC fast charger integration. Or advanced automated driving assistance and, one day, fully autonomous cars.

You get the idea. It's a different world now. The cars of the future will be more like computers on wheels than anything else, so now Volkswagen and the rest need to get great at making computers. The alternative is they get turned into car body manufacturers for tech companies, or worse, outright slaughtered by new players who are better at this; China's industry in particular is way ahead on this front

To be fair, pretty much every "legacy" automaker has struggled with pivoting their 100-year-old businesses to do this stuff well. (And companies like Fisker show the startups aren't automatically better, either.) But VW's CARIAD division has had some particularly high-profile setbacks. I wrote about this in-depth for The Verge at the end of 2022, and it feels like things are only incrementally better since I did. 

Issues with software have led to negative reviews of early examples of cars like the Volkswagen ID.4; delays of crucial VW Group products, such as the new Porsche Macan EV and Audi Q6 E-Tron; entire platforms, like the one that was supposed to underpin the flagship "Project Trinity"; and leaning on outside partners like Mobileye for automated driving rather than doing everything in-house. Besides CARIAD's layoffs and reorganizations, these software messes are also part of why VW CEO Herbert Diess was shown the door in 2022.

So, yes. It's been bad. And as the Volkswagen Group loses ground in China and struggles to grow in North America—where its core brand has long struggled to be relevant—it cannot afford to be so bad at the future. 

Enter Rivian, which is doing very cool things but needs cash to get past the enormously costly "startup" phase of its business, much like Tesla before it got the Model 3 and Model Y out in force. The investment from VW will help Rivian stay in the game. But it also establishes Rivian as a software powerhouse—something it hadn't really been known for until recently. Cool-looking electric SUVs, sure. But now the world is starting to view Rivian as a leader in tech as well.

Here's TechCrunch to explain just what VW is buying:

Rivian’s new electrical architecture and compute platform reduced the number of electronic control units (ECUs) used to control the vehicle from 17 different ECUs in its first generation to seven. This new zonal architecture allows Rivian to cut more than 1.6 miles of wiring from each vehicle—a 44-pound weight savings—and to build its vehicles faster.

That new electrical architecture—or what Scaringe describes as new vehicle topography—is seen internally as a key innovation at Rivian and one that allows the company to wirelessly update software. The new zonal architecture supports Rivian’s software stack, which was also developed and deployed in-house. That software stack includes everything related to real-time operating systems (RTOS) that manage the car, such as thermal dynamics, ADAS and safety systems, as well as another layer related to the infotainment system.

So it's not just "software" here. It's a rethinking of how cars are designed and built entirely, something the VW Group has repeatedly tried and failed to do. 

I think it's important to note that a Rivian partnership won't reverse VW's misfortunes overnight. Indeed, this partnership is going to take years to bear fruit. Likely, VW will find some way to buy time with more conventional products—hence the debuts of the updated Jetta and Golf R this week—and whatever EV rollouts it was already confident about until the electric race really heats up toward the end of this decade.

Rivian has a better shot at staying alive until then, too, which is great news for everyone who wants to pre-order an R3X. But it doesn't say much about "legacy" auto's ability to face the future on its own. VW's stock price slipped while Rivian's shot up 30% after the announcement. 

60%: Welcome To The Era Of Uncertainty 

Porsche Taycan Cutaway

I'd say the first part of the 2020s reflected a belief that the auto industry could just pivot to batteries and software fairly easily, because Tesla pulled it off, so how hard can it be when the real companies gave it a shot? But 2024 is where everyone is getting a badly needed reality check. See above for one of the highest-profile examples out there. 

Over at the Detroit Free Press (subscription required), writer Mark Phelan lays out just how hard this transition has been, but also throws water on the idea that uneven EV adoption this year means electric power is "done": 

So what's up with all the reports about automakers delaying plans for when, where and how many electric vehicles they’ll produce and sell?

They’re true, but they’re only part of the story.

General Motors and Ford have repeatedly said they are delaying the production of EVs, batteries and motors. GM just trimmed its 2024 EV sales forecast by 50,000 vehicles. Fiat Chrysler (now part of Stellantis), a slow starter, has yet to sell any.

Those developments and more fueled claims that EVs are a sham, toys for the wealthy and woke, unfit for use by the rest of us.

Are EVs doomed? Have automakers wasted precious time and resources rushing them into cul-de-sacs? Not a chance.

Remaking a 140-year-old industry is hard. In addition to the goofs and glitches that come with any new technology, virtually every major global automaker has either gotten out over its skis or has been lambasted for a slow and half-hearted strategy.

Phelan says something I really like: that automakers "won the press conference," meaning they made big, bold announcements that seemed amazing, but were edicts their engineers and the infrastructure couldn't deliver on. Expect a lot more "adapting to changing realities," as he puts it; more ups and downs, more canceled and delayed products, more pivots and more of an overall mess than anyone could've predicted. 

90%: Cruise Gets A New CEO From Amazon, Microsoft

GM Cruise Integrated AV System

And here's yet another example of transition headaches. GM's Cruise, which hit pause on operations last year amid high-profile crashes and only resumed service this month, named a new CEO yesterday: former Amazon and Microsoft executive Marc Whitten. 

He seems legit, and Cruise needs the help getting back on track, CNBC reports

Whitten was a founding engineer at Microsoft's Xbox before leaving the company after more than 17 years to become chief product officer of audio company Sonos in 2014, according to his LinkedIn profile. He then worked at Amazon as vice president of entertainment devices and services before his most recent role as chief product and technology officer for software development company Unity's Create.

His appointment comes at a crucial time for Cruise, which is testing and relaunching its autonomous vehicles on public roadways. It ceased operations weeks after an Oct. 2 accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise robotaxi. A third-party probe into the October incident ordered by GM and Cruise found that culture issues, ineptitude and poor leadership fueled regulatory oversights that led to the accident. The probe also investigated allegations of a cover-up by Cruise leadership, but investigators did not find evidence to support those claims.

Getting to the future is a real pain in the ass, isn't it?

100%: Which 'Legacy' Automaker Is Doing Tech The Best?

2021 Volkswagen ID.4 Technical Cutaway

Like I said, every automaker has had troubles with this stuff. So who in your mind is doing it best? When it comes to EVs, I'd say Hyundai Motor Group, but it still lags behind on things like over-the-air updates. Plus, I don't think their ADAS technology is anything to write home about, at least as far as the passenger cars are concerned. And Mercedes has a strong software game, but a weirdly waning interest in EVs.

So which established player are you betting on? Or is the answer "none of the above"?

Contact the author: patrick.george@insideevs.com

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