The €14 Billion Lesson from Automotive

Let's talk about what happened when VW finally realized software mattered.

In the mid-2010s, as Tesla's software-defined vehicles started reshaping the market, German automotive OEMs faced reality: they had no internal software capability. After years of outsourcing everything to suppliers like Bosch, Continental, and system integrators, they couldn't build a competitive in-car experience on their own.

VW's response was CARIAD - a software subsidiary launched to centralize and own software development across the VW Group (Volkswagen, Audi, Porsche, etc.). The ambition was clear: catch up to Tesla, build a unified software platform, and regain control.

The result? A €14 billion failure.

By 2024, CARIAD had:

• €2 billion in annual losses
• 2,000+ job cuts announced
• Delayed vehicle launches - ID.3 and other models pushed back years
• Software quality disasters - buggy infotainment systems, failed over-the-air updates
• Organizational chaos - multiple restructurings, leadership churn

Despite massive investment, VW couldn't solve what seemed like a straightforward problem: build good software. Not because they lacked money. Not because they hired the wrong people. But because organizational learning can't be purchased retroactively.

When you outsource a capability for years let alone decades, you don't just lose technical skills. You lose the culture, processes, decision-making patterns, and institutional knowledge that make execution possible. You can hire talented engineers, but if your organization doesn't know how to work with software - how to iterate, test, prioritize, or integrate across teams - those engineers can't succeed.

Tesla didn't face this problem because they never outsourced software. From the beginning, software was treated as foundational. Engineers worked directly on vehicles. Software and hardware teams were integrated. Iterations happened quickly. The entire organization learned together.

VW tried to bolt software capability onto a structure designed for something else. It didn't work. And €14 billion later, they're still behind.

The lesson isn't "never partner." The lesson is: you cannot outsource strategic capabilities and expect to rebuild them later.