Volkswagen Group’s ambitious software division, Cariad, is once again grappling with significant financial challenges, reporting substantial operating losses and planning further workforce reductions. Despite efforts to revitalize its software development, the division continues to be a major financial drain on the German automotive giant.
Mounting Losses and Revenue Struggles
In the past year, Cariad recorded an operating loss of $2.64 billion (approximately €2.431 billion). While the division saw its revenue climb to $1.44 billion (€1.327 billion), up from $1.17 billion (€1.078 billion) in the previous year, this growth was overshadowed by an even larger operating loss compared to 2023’s $2.6 billion (€2.392 billion) deficit.
The financial struggles are not new. Since its inception, Cariad has accumulated staggering operating losses exceeding $7.5 billion over the past three years, even as its revenue approached $3.5 billion. This trend began in 2022, when the division posted a loss of $2.28 billion (€2.1 billion) on revenue of $870 million (€800 million).
Impact on Vehicle Launches and Product Quality
Cariad’s persistent software development issues have directly impacted Volkswagen Group’s product roadmap. Market launches for key models such as the Porsche Macan Electric and the Audi Q6 E-Tron were delayed by a full year due to these software setbacks. Furthermore, early versions of software for popular electric vehicles like the Volkswagen ID.4 and ID.5 were plagued by freezing and glitching problems, underscoring the division’s ongoing challenges.
These quality concerns led to a significant leadership overhaul in 2023, with new executives appointed to key positions including Chief Operating Officer, Chief Technology Officer, and Finance Director. While newer software iterations have shown improvement, the division’s overall health remains a concern.
Planned Layoffs and Strategic Realignment
In response to the ongoing financial pressures, Volkswagen Group intends to lay off approximately 1,600 employees at Cariad by the end of the year. This move aligns with the group’s acknowledgment of a planned “rescaling of operations” as detailed in its 2024 financial results.
Established in 2020 as the Car.Software Organization, Cariad currently employs nearly 6,000 people globally. Its core mission is to create a unified operating system and electrical architecture for future Volkswagen Group vehicles. Initial plans to develop the software for Volkswagen’s flagship EV, Project Trinity, were derailed by delays, forcing a complete restart.
Looking Ahead: Partnership with Rivian
In a strategic shift, Volkswagen Group plans to leverage its $5.8 billion investment in Rivian. The revamped flagship architecture is expected to incorporate Rivian’s software expertise, including advanced features like Level 4 driver assistance systems, signaling a new direction for Cariad’s development efforts.