The CARIAD Insider Report (and What We Can Learn from It)

Welcome to Issue #70 of The German Autopreneur!

CARIAD represents the struggles of the German automotive industry like no other company.

For years, Volkswagen's software unit symbolized everything that went wrong with digital transformation. Everyone blamed them for delays and missed deadlines.

I've often criticized CARIAD myself.

But over the past few weeks, I spoke with dozens of insiders: current and former CARIAD employees, service providers, and managers. People who witnessed everything from the beginning.

They told me the other side of the story.

"The fact that Volkswagen still has cars rolling off the production line? That's entirely thanks to us."

Today, I'm sharing their perspective. And what we can all learn from the CARIAD case study.

Note: This newsletter is longer than usual. The CARIAD story is too important to rush through. All quotes are anonymized and reflect personal experiences.

The Vision Was Perfect, the Execution "Extremely Stupid"

CARIAD started in 2020 with an inspiring vision.

One central software unit for the entire Volkswagen Group. Finally, no more building the same thing twice for different brands. No more chaos from different systems.

The idea was perfect. The execution? "Extremely stupid," as one insider put it.

Instead of starting small, they went all in. Employees from Volkswagen, Audi, and Porsche were transferred to CARIAD. Along with their existing projects. Others joined from suppliers and subsidiaries. Within months, the organization expanded to several thousand employees.

Without a clear concept. Without defined roles. Without real authority.

The Chaos of the Early Days

An insider described what happened: "I joined CARIAD and had no idea what my job was. There was no job description. So I started building what I knew from my brand."

That's exactly what everyone did.

The Audi people built Audi structures. The Porsche people created Porsche processes. The Volkswagen people made their own systems.

Instead of a lean software company, they created a patchwork of mini-corporations.

The result?

"I had 17 status meetings per week. Everyone wanted to hear the same thing, just on different slides."

Instead of coding, developers made PowerPoints. Instead of innovation? Bureaucracy.

The 7 Fatal Flaws of CARIAD

1. Too Much, Too Fast

They flooded the organization with money. Within months, they hired 6,000 employees.

"We hired anyone who could carry a laptop. Sometimes the hiring process took just 24 hours."

The predictable result? Many new hires had zero automotive experience. Students became project managers. IT consultants became software architects.

2. No Real Budget

CARIAD was never set up as a true product company.

They were supposed to develop software but had no budget of their own. The money came from the brands – who kept all the power.

CARIAD had to deliver but couldn't make decisions.

3. The Legacy Burden

CARIAD was supposed to build the future architecture. Platform 2.0 for all Volkswagen Group brands.

But in 2021, they got an extra assignment: the notorious platforms 1.1 and 1.2. Audi and Porsche had already failed with these.

"Platform 1.2 had 200 different suppliers. The system was so overloaded that most computing power went to special requests."

An insider explained the complexity: A radar from supplier A sends data to a camera from supplier B. That consolidates and sends to a long-range radar from supplier C. Which goes to an ECU from supplier D, running software from supplier E.

And communication between units D and E didn't work.

The conflict was inevitable. "We were supposed to build the future. But from that point on, we only fought fires."

4. The Software Company Without Software

Here's where it gets absurd: CARIAD was supposed to be a software company. In reality, they barely developed any software.

"I had test managers, error managers, project managers. But not a single coder on my team."

Instead, they worked the old way: hiring external service providers. CARIAD became an expensive middleman.

"We were just a tube. Software came from Tier 1 suppliers, we reviewed it and passed it to the brands."

5. The Brand Wars

What outsiders didn't see: The fights between Volkswagen brands continued inside CARIAD.

"Audi wanted this, Porsche wanted that, Volkswagen wanted something else."

The brands saw CARIAD as their service provider. CARIAD saw itself as the product owner. This conflict was never resolved.

"We developed the same feature six times because each brand wanted a different version."

Even worse: The brands actively worked against CARIAD. They feared losing power. So they built parallel teams. They blocked decisions. Some even leaked negative stories to the media.

"Porsche is developing its own platform for 250,000 cars a year. Just because they won't take anything from Audi. That's kindergarten level."

6. Old-School Managers

"They put the fox in charge of the henhouse. The same managers who failed at the brands were now supposed to build the digital future."

Many executives came from the hardware world. Software? Agile methods? Foreign concepts.

Instead: PowerPoints. Status meetings. Corporate politics.

"Volkswagen's structures promote people interested in their careers. They don't care about the product or company at all."

Many managers used CARIAD as a career stepping stone. Company success was secondary.

7. The Comfort Culture

What CARIAD employees told me about work culture was surprising.

The work-life balance was amazing. No overtime. Guaranteed remote work. All the benefits of a corporation, plus better pay. Extremely comfortable.

But they also realized: This isn't how you beat Tesla or Chinese startups.

"At CARIAD, average working time is under 40 hours a week. Friday at 11 AM, the weekend starts. That's not how you win against Asia."

The Task Force Made Everything Worse

Problems became increasingly obvious.

Model launches had to be postponed because software wasn't ready. Pressure on CARIAD kept growing.

In 2021, they announced the "Task Force." It was supposed to solve problems. Instead, it made everything worse.

"Suddenly we had to deliver status reports morning and evening. From that point on, nobody worked productively anymore. Just firefighting."

Then Came Sanjay

Sanjay Lal, to be precise. He'd worked at Google, Tesla, and Rivian. Everyone hoped he would save CARIAD.

He understood software. Had a clear vision for the future.

"With Sanjay, optimism returned. Finally someone who knew what he was talking about."

Sanjay built the SDV hub. He integrated Porsche and Audi to end the brand conflicts.

For a brief moment, everything seemed perfect. As if they had finally turned things around.

Sanjay spent about a year trying to fix CARIAD.

Then the Rivian deal happened. Negotiated completely without CARIAD.

Overnight, all future projects would go to the new Rivian joint venture. Including the SDV Hub. But without the employees.

"Now we're only responsible for legacy. No more innovation, just maintenance until 2029."

Sanjay Lal has since left the company.

But why this abrupt strategy change?

"Oliver Blume only created the Rivian joint venture because he couldn't break the brands' power."

This statement hits the core: Nobody at Volkswagen currently has the power to unite everyone. The brands act like independent kingdoms. Each defends its territory. Fighting to preserve old structures at any cost.

What Happens Next?

Despite all the criticism, one fact remains: CARIAD did deliver.

"Platform 1.1 now runs in millions of vehicles. Stable. We stabilized 1.2 enough to get vehicles on the road."

Customers call the ID.7's software the best Volkswagen has ever had.

"Without us, not a single car would roll off the line. But nobody sees that."

So what happens to CARIAD now?

After the Rivian deal, these competencies remain:

• Existing software (legacy)

• ADAS/autonomous driving (with Bosch)

• Cloud services

The problem: CARIAD has far too many employees for these reduced tasks. A massive job-cutting program is already running.

"Motivation has completely collapsed. Many feel betrayed."

"We worked incredibly hard for years, gave 130%. And now they're shutting us down."

Some report burnout cases. Those who can take severance packages or transfer back to the brands.

Employment guarantees run until 2029. After that?

Three scenarios are emerging:

1. Service unit: Maintenance plus selected tech modules for the group

2. Tech boutique: Lean specialist unit for ADAS/Cloud

3. Gradual shutdown: Tasks completely migrate by 2029

Most insiders bet on scenario 3.

What We Must Learn from This

Learning 1: Small teams > Large organizations

6,000 employees without real decision-making power create chaos. A lean team with full responsibility would have achieved more.

Learning 2: Old and new don't mix

Legacy and innovation under one roof doesn't work. You need strict separation.

Learning 3: Culture can't be forced

Try to turn corporate managers into a software company? You get an expensive copy of the corporation.

Learning 4: No power, no transformation

If the CEO can't overcome internal power struggles, any transformation is doomed.

Learning 5: Who pays, decides

As long as the old world finances the new world, the balance of power will remain. Real transformation needs real independence.

My Take

CARIAD is a case study. It shows why transforming into a software company is so difficult for traditional automakers.

The problem: We're not just fighting competitors. We're fighting ourselves.

I like to describe it this way: Transformation is like a sprint.

The Chinese show up at the starting line in stylish new Nikes. Legacy carmakers dragging a heavy metal ball chained to our leg. Like in old prison movies.

This metal ball represents their decades-old structures. Their hierarchies. Their processes. And internal politics.

While newcomers start on a greenfield, they must transform a century of history.

CARIAD shows: You can't do this by founding a new unit and hiring 6,000 people.

Our biggest weakness isn't technology. It's our inability to change.

CARIAD employees achieved the impossible under impossible conditions. They deserve respect for that.

We owe it to them to ensure their work wasn't wasted.

From this expensive experiment, traditional automakers must learn one thing: If they want to compete tomorrow, they need to change everything. Structures. Culture. And most importantly: power dynamics.

That means being ruthless. Getting rid of those who resist change. Traditional automakers can't afford to keep people who block transformation.

Time is running out.

That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
— Philipp

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