AUTONEWS

VW loses €1.5 billion and abandons partnership with Bosch

Cariad—a company established by the VW Group to develop the software systems increasingly essential to modern vehicles—was designated to represent the German consortium in the "Automated Driving Alliance" partnership with fellow German firm Bosch. The goal was to develop an autonomous driving system; VW invested approximately €1.5 billion in the project, funds that have now gone to waste following the cancellation of both the project and the partnership.

This is not the first time Cariad has landed the German group in hot water. The software company was formed through the merger of over a hundred startups specializing in software, yet it never managed to produce a system for the group's various brands that could match the quality of the best systems offered by competitors. This failure contributed to the departure of then-CEO Herbert Diess in late 2022 and forced Porsche to turn to Google’s Android Automotive to equip its models—specifically the electric Macan—starting in late 2024.

Despite this unenviable track record, Europe’s largest automotive group (and the second-largest globally) once again placed its trust in Cariad’s technical teams. The plan was to collaborate with Bosch—leveraging Mobileye’s cameras and digitization capabilities—to design a driver-assistance system effective enough to eventually deliver an autonomous driving solution suitable for all the group's brands, particularly the luxury ones. However, according to the German newspaper *Bild*, VW Group management acknowledges that, despite all efforts, "a significant disadvantage persisted in the VW system compared to those of its rivals," specifically Tesla and Waymo.

The VW Group admits that Cariad and Bosch were unable to master this complex technology, yet maintains that it is impossible to envision the car of the future without autonomous driving capabilities. That is why it is already scouting the market for alternatives—not partners to help develop an in-house system, as it has done until now, but rather a turnkey solution. All signs point to the company having already found one; according to the German press, the automaker is expected to announce a deal with a supplier soon, likely in September.

There appears to be a possible explanation—or rather, two—for this rapid search for an alternative. The first (and less likely) option is a solution from Mobileye, a NASDAQ-listed Israeli company. Originally a specialist in imaging and image processing software, Mobileye has recently expanded its scope to include autonomous driving, particularly after Intel acquired an 88% stake in the firm. However, the level of development and refinement offered by its technology remains to be seen. A second potential supplier for an autonomous driving system is Rivian, a young electric vehicle manufacturer with which VW formed the "Rivian and Volkswagen Group Technologies" joint venture—a partnership involving a $5.8 billion (approximately €5 billion) investment from the German group. The joint venture’s goal was to develop new platforms and electronic architectures for the next generation of electric vehicles. Rivian is developing an autonomous system known as "Gen2"—independently of the aforementioned partnership—and this solution could potentially be of interest to the VW Group.

Cost-cutting measures could lead Volkswagen to sell its shares in Bayern Munich...The Volkswagen Group needs to "tighten its belt" amidst the restructuring of its operations, and selling shares held in football clubs like Bayern Munich could be part of the measures taken.

According to *Correctiv*, the manufacturer is weighing the future of the 8.3% stake in the Bavarian club—held via Audi since 2009—even though the club has an enterprise value of €4.7 billion, according to Football Benchmark. The initial purchase cost €90 million.

Also under review is the future of the 10.4% stake in Stuttgart held via Porsche, acquired in 2023 for €45 million. Furthermore, MHP (a Porsche subsidiary) might cease to be the main stadium sponsor for the club from the capital of Baden-Württemberg.

Football is a potentially lucrative business in which the Volkswagen Group has been involved for decades; it even owns Wolfsburg, a club recently relegated to the German second division. In that case, *Correctiv* reports that funding is likely to be reduced. VW also holds a 20% stake in Ingolstadt 04, which plays in the third tier. There are no plans to divest from these two clubs.

Now, not only are the stakes in Bayern Munich and Stuttgart potentially in jeopardy, but sponsorship cuts may also be on the cards—an area where the group is active, including with the German national team.

The situation at the Volkswagen Group is complex, as it considers major restructuring measures to return to profitability and sustainability. *Manager Magazin* reported a few weeks ago that the group could cut up to 100,000 jobs and close four factories in Germany over the coming years.