“Software opens the door to new business models”

You recently started electrifying the model range – now you are picking up the pace with digitalisation. How are you going to do both at the same time?

Zellmer: Our e-offensive is already in full swing. We have successfully launched cars such as the ID.3, ID.4 and ID.6 specifically for China. Our electric cars have had an excellent reception: We are aiming to sell around 450,000 electrified cars this year – including all-electric models and plug-in hybrids. At the same time, we are expanding to make software a core competency, because digital strengths are becoming more and more of a factor in customers’ purchasing decisions. Automotive manufacturers who don’t offer the same digital connectivity as consumer electronics have already lost out.

Ulbrich: Our successful electric cars are a prime example of how we are able to master the software challenge. In recent years we often said that the Volkswagen brand will move e-mobility from a niche product to the mainstream. Many people didn’t believe us at first – but now no one questions whether Volkswagen will deliver. We have an even more challenging process ahead of us with the further digitalisation of our cars. It’s not a sprint, it’s an ambitious marathon.

The latest competitors include challengers such as Tesla and Big Tech companies. How can Volkswagen compete with their software expertise?

Ulbrich: Volkswagen is already transitioning from a hardware company to an integrated provider of hardware, software and mobility services. The close collaboration with our new software entity CARIAD is helping us here, making us faster and drastically increasing in-house expertise. And we’re changing in other areas as well – a good example of this is Technical Development in Wolfsburg, which is intensifying its use of agile approaches. However, Volkswagen will not transform into a pure tech giant. That wouldn’t be good. Over the decades we have accumulated experience in producing safe, high-quality hardware in complex processes. We are combining the best of both worlds: safe automobile hardware and progressive software solutions.

Zellmer: We respect our new competitors. However, the comparison is misleading. Companies such as Tesla started their businesses from scratch as it were. Volkswagen, as a volume manufacturer, has different strengths: With our large volumes we are able to achieve tremendous cost benefits across the group. The Volkswagen brand alone sells around 6 million cars to customers each year. We will shift this enormous portfolio to electric cars in the next five to eight years, and in doing so change the market massively. Our ID.3 and ID.4 models, which make use of our most powerful software and electronics architecture at present, are a reflection of this development.

What are their strengths?

Ulbrich: Firstly, the new electronics architecture consists of two networked high-performance computers. These two computers perform functions that are distributed across many control units in other vehicles. That makes the platform more powerful and cleverer. This new architecture enables us to make large-scale over-the-air updates for the first time at Volkswagen. Online, via a mobile network, wherever the Volkswagen is. These online updates go far beyond the updates that were previously possible via the infotainment system.

Zellmer: This enables our customers to keep their cars’ software up-to-date and even download completely new functions. This is already standard in the case of smartphones, and over-the-air updates will become the new normal in cars as well. We took the time needed to be able to provide maximum safety in this area as well. After all, updating a smartphone and updating a car are wildly different. If updating a smartphone goes wrong, the worst-case scenario is that it is no longer possible to make any calls. However, nothing is allowed to go wrong in the car, it has to brake, steer and indicate perfectly.

What are the next milestones?

Ulbrich: A focal point of the transition will be the Trinity in 2026, a completely new high-tech electric car. It will offer long ranges, fast charging and a very high degree of digitalisation. We have already laid the foundation for this: with progressive software architecture that is constantly evolving. With this foundation, Volkswagen will be an even more attractive option for young people!

Zellmer: Software opens the door to new business models for us: In future, an increasing number of people will hire a car for special occasions – for a weekend getaway, to transport furniture or to go camping. When changing cars it will be a matter of course to transfer personalised settings – for example, a customised seat position or a personalised playlist. We will reserve some software functions only when we need them – for example, a driving assistant for a long journey to go on holiday. For us as a company, these functions on demand offer enormous value-added potential. We anticipate an additional annual revenue in the region of hundreds of millions.

What makes Volkswagen stand out from other cars in the digital age?

Zellmer: Let’s take the most recent example of the augmented reality head-up display: This system differentiates the ID.3 and ID.4 from the competition in their classes – it makes them more valuable, better, more modern, cooler, safer because drivers can see all the important information right in front of them. Generally speaking, software will enable a totally new mobility experience. Software in the car – it’s communication, it’s comfort, it’s momentum, it’s sustainability. In short: Software is quality of life.

Ulbrich: Exactly, software has long been determining the character of our cars. We use software to personalise the steering, ambient lighting and engine sound. But despite everything, the hardware remains important: Here, we have one of the most cutting-edge electric car platforms in the world with the MEB. This platform has enormous potential for scaling. Not just within the Volkswagen brand, but at the affiliated brands Audi, SEAT, ŠKODA and Volkswagen Commercial Vehicles as well. Thanks to these economies of scale, as a group we have the potential to make digital innovations affordable and suitable for the mass market.