00:00:00: [MUSIC]
00:00:18: >> Hello and welcome to the IAA Mobility Visionary Club.
00:00:21: Today, I am really excited to introduce you to our guest.
00:00:24: He is the CEO of Cariad,
00:00:27: that's Volkswagen Group's Automotive Software Company,
00:00:30: our guest today, CEO Peter Bosch of Cariad.
00:00:34: Peter, I'm so excited to have you with us talking about Cariad's
00:00:37: international footprint, how you're growing,
00:00:39: and all of the exciting things you're up to.
00:00:41: But Peter, first, let's hear from you.
00:00:42: It's our pleasure to welcome you today to Episode 12.
00:00:45: Thanks for being with us.
00:00:47: >> Thanks for having me.
00:00:49: I'm really excited to be here.
00:00:50: It's an honor, especially since I can talk about two things that I love.
00:00:54: It's cars and it's technology.
00:00:56: As you might know, Volkswagen Group has selected as
00:01:00: its future strategy to become the global automotive tech driver,
00:01:04: so the driving technology for the automobile,
00:01:08: and of course, key to this is software.
00:01:11: This matches quite well with my personal business purpose,
00:01:16: to bring vehicle technology into the next era, into a digital era.
00:01:21: Because we as an automotive industry,
00:01:24: we've built our success and inventions on technologies of the 90th and the 20th century.
00:01:28: It worked really well.
00:01:29: Cars are amazing, companies were successful,
00:01:32: customers happy, shareholders got wealthy.
00:01:35: But now there's a whole new set of core technology coming from combustion engines,
00:01:40: off Rudolph diesel, to great vehicles of ferry Porsche, to digital technologies.
00:01:47: Cars are becoming software-driven devices on wheels,
00:01:50: so software is not just the icing on the cake, it is the cake.
00:01:55: And to make the car safer, more sustainable, more comfortable, more fun, of course.
00:02:01: This is what software enables us.
00:02:03: And I mean, if you think you go from Berlin,
00:02:08: where VDA is to Munich, where the IA Mobility is, with a car,
00:02:12: everything is kind of powered by software.
00:02:14: First of all, the routing, that's nothing new,
00:02:17: but that routing has live swarm data from all other cars.
00:02:20: It's a great innovation that helps you avoid congestions.
00:02:24: Then it gives you, with your EV, it gives you a charging plan.
00:02:27: When is the best time to charge?
00:02:29: Where is the best charging station?
00:02:31: Is it free? Is it broken?
00:02:33: Does it have the charging power?
00:02:35: It preconditions your battery before you enter the charging station to charge faster.
00:02:41: Whilst you're charging, your kids can watch a movie or even do gaming,
00:02:45: which is possible in our latest model.
00:02:49: And then if you continue, I mean, driver assistance systems will give,
00:02:53: a lot of more safety will give back time,
00:02:56: that you can do something else during driving with the higher level systems.
00:03:00: If there are functions like your massage function, which you don't use frequently,
00:03:03: you can use it by voice control, voice control, controls the whole vehicle.
00:03:07: So this shows that the software is the central technology to the vehicle,
00:03:13: central success factor for many aspects of the driving experience.
00:03:17: And since the car becomes software driven, it's a new S-curve, a new innovation curve,
00:03:21: not only with new products, but also with new technologies,
00:03:25: that of course incumbent OEMs, like the Volkswagen Group, need to learn.
00:03:30: And it's not just new technologies, it's a new way of working, it's a new culture,
00:03:33: it's also a new type of talent very often.
00:03:36: So this is not less than the reinvention of our industry.
00:03:41: Many people perceive it as a challenge, I can confirm it is a huge challenge,
00:03:46: but I can also confirm it's a huge opportunity.
00:03:50: And the challenge part of it, to me personally, became most obvious
00:03:55: when after Covid I was in Shanghai on the Shanghai Motor Show in 2023.
00:04:01: It was kind of a wake-up call.
00:04:02: We saw Chinese manufacturers not delivering just great quality in their cars,
00:04:08: but also being very fast and agile in developing their software,
00:04:12: in infotainment, in cloud functionality, in ADAS,
00:04:15: everything's AI-based, all functions of the car could be updated over the air,
00:04:22: a very good smartphone integration.
00:04:23: So this showed us what is possible and how fast also new market participants can catch up.
00:04:35: And we had at that time new car experts and added software to our products,
00:04:42: every new function required a new ECU.
00:04:46: We worked in the traditional tier one system,
00:04:49: so we brought specifications, gave them to tier one suppliers,
00:04:52: who gave them to tier two suppliers, who gave them to tier three suppliers,
00:04:55: and change requests took really long, with the complex and slower integration.
00:04:59: We didn't have really truly software-centered architectures,
00:05:03: and also the development process was very successful.
00:05:07: We had learned for a long time, it wasn't as digital.
00:05:11: So as you see, there is a huge impact on the competitive edge,
00:05:16: and also on the delivery capability and really bringing cars to the road.
00:05:19: And also at that time, this was a huge challenge for Volkswagen Group and its brands.
00:05:24: So out of the challenge, this became an opportunity.
00:05:28: We made a massive turnaround, we transformed, carried and software in the group.
00:05:33: First, evidence is all the cars with the new software are on the road,
00:05:39: and they are super successful.
00:05:42: It's not just the Shanghai anecdote I want to share,
00:05:45: but also I want to share my Saturday morning routine,
00:05:47: which is reading a classical automotive magazine like Automotive Sport or Tech Magazine.
00:05:53: And I'm really a tech magazine geek,
00:05:57: and we can see that our cars are now winning against the competition.
00:06:02: The Volkswagen ID 7 won overall Chinese, Korean and Japanese competitors.
00:06:08: Our one over many premium competitors got top end cap safety scores,
00:06:13: which are based on security.
00:06:17: We can see in the sales statistics in Europe, we're really proud that on the EV side,
00:06:22: we've now outperformed in terms of sales Tesla and all other manufacturers in Germany over the last months.
00:06:30: The eight most sold cars out of 10 came from Volkswagen Group,
00:06:36: who had carried software in there, and as I said, they're also performing well with the experts.
00:06:41: So the product is there, it works, which is not always for sure with software and customers love it.
00:06:49: Also, our cloud solutions got much more robust and fast.
00:06:52: So that was success number one, that was possible through a really big transformation.
00:06:56: Secondly, we got much faster and we reduced massively cost.
00:07:02: We introduced a tech org, like the big tech organizations,
00:07:05: product oriented, lots of AI tools, using our scale and platform advantages,
00:07:11: and we shifted away from the tier one supplier model to more and more in-house development.
00:07:16: So in the beginning, we just continued the traditional way of developing automobiles,
00:07:21: like we did that for many decades, which is external development,
00:07:27: and then bring it all together with software.
00:07:29: You need to be close to the code, you need to love the code,
00:07:31: you need to own the code, and that's what we're doing.
00:07:34: And the third factor after customer success and cost,
00:07:38: we prepared new technology paths for the future.
00:07:42: Take the China example, because we needed to be fast,
00:07:45: we did a collaboration with Chopin, got a software license,
00:07:49: created our own software architecture based on the license, which we now 100% own.
00:07:55: Also with Horizon Robotics, we did a joint venture on autonomous driving,
00:07:58: both, by the way, our startups, both in the meantime had their IPOs.
00:08:02: Both IPOs were super successful and technology works,
00:08:05: and we've worked our way back to the top of the Chinese technology pyramid.
00:08:11: In the Western world, we've created a refreshed partnership with Robert Bosch
00:08:17: on autonomous driving for the Western world,
00:08:20: and as forks one group, we're partnering with Rivian in the US
00:08:26: on a future software architecture.
00:08:29: So this was a very quick rebound on getting us back to technology leadership.
00:08:35: At the same time, our automotive cloud is now the largest of its kind,
00:08:40: 45 million vehicles online, 24/7,
00:08:44: and needless to say that we infused AI everywhere where we could.
00:08:49: So overall, I'm super happy that together with all brands of the Forks One Group
00:08:56: we've carried software around, and we aligned our software mission.
00:09:00: To be honest, one big advantage is our scale because software is a scale game,
00:09:05: and we are, of course, a scale player.
00:09:07: Also, software is a platform business, and we were always great in developing platforms
00:09:11: as a platform champion.
00:09:14: I need to say, most inspiring is that I've found an amazing team that loves cars,
00:09:20: but that is fully techie, the delivery champions, the coders, the transformers,
00:09:24: the entrepreneurs, innovators, and there are, of course, car guys and car girls.
00:09:29: And I have to say, the German automotive ecosystem changed a lot over the past few years.
00:09:34: It changed to a tech ecosystem.
00:09:36: Also, VDA helps a lot on this to fuel this ecosystem,
00:09:41: and I think we'll all see it on the IA mobility.
00:09:44: So we've built a setup of a strong tech comeback, and the pace is picking up.
00:09:50: So software was once our really biggest challenge.
00:09:54: Now it's step by step becoming a competitive advantage.
00:09:58: And, of course, this will contribute to the Volkswagen Group's strategy
00:10:02: to become a global automotive tech driver.
00:10:05: And that's really fun to co-create this with all parts of our group globally.
00:10:12: And I'm really keen for questions.
00:10:15: Well, perfect. Let's open it up to questions.
00:10:17: Guys, if you're joining us on LinkedIn Live, you can put your questions in the chat.
00:10:21: I know some folks have been sending in their questions ahead of time,
00:10:23: so we've already got a couple up our sleeve.
00:10:25: Peter, I appreciate you getting personal with us
00:10:27: and sharing your Saturday morning with a classic automotive car magazine.
00:10:32: So I'd like to start with a personal question.
00:10:35: You took over during one of Karajad's most turbulent chapters.
00:10:39: What convinced you that the challenge was worth taking on?
00:10:43: I mean, if the challenge is worth taking on, I think it's the purpose I mentioned.
00:10:49: Bring our industry technology into the next era, because, I mean,
00:10:54: I'm born in Germany.
00:10:56: This country has built its wealth, its stability, its social benefits,
00:11:05: also on the success of the automotive industry.
00:11:10: And I would love to drive this into the 21st century.
00:11:16: At the same time, I'm an enthusiast also of many of our brands,
00:11:21: Volkswagen, Audi and Porsche.
00:11:22: I want to see customers excited about technology in the future.
00:11:26: And I also want to want to see shareholders having that vision,
00:11:30: that technology vision in the Visionaries Club here,
00:11:33: that we will be able to lead by technology and not just by technology for purpose,
00:11:37: but also to make the product more safe, more secure, more comfortable.
00:11:42: And technology is the biggest lever.
00:11:44: And yes, it was a difficult situation.
00:11:46: But the feeling of creating a turnaround together with the team
00:11:52: is one of the greatest feelings on Earth.
00:11:56: And we are experiencing that at the moment.
00:11:59: Well, there's no success like shared success.
00:12:01: I'm curious how this transformation positions Karya
00:12:04: to compete with leading tech companies globally.
00:12:07: Can you share a little bit about that with us?
00:12:10: Yeah, that's a really good question.
00:12:13: Because we also ask ourselves the question,
00:12:15: do we compete with leading tech companies,
00:12:17: or do we really compete with leading automotive companies,
00:12:20: or something in between?
00:12:22: And that's exactly what we realized.
00:12:24: If you're just offering a tech product,
00:12:26: you might not have the fascination, the style, the experience of an automobile.
00:12:32: If you just build on traditional automobile virtues or competencies,
00:12:38: you might not catch up with the tech appetite many of our customers have.
00:12:42: And we're exactly trying to merge our traditional strengths
00:12:48: with the new strengths of the tech industry
00:12:49: and build something quite unique that you only can do
00:12:52: if you exactly operate at this interface.
00:12:56: You've got to understand automotive and your customers,
00:13:00: and we're totally customer obsessed.
00:13:01: But at the same time, you need to understand and learn tech
00:13:06: and keep up with latest technology.
00:13:09: And that's exactly what we're trying to do.
00:13:11: And also, where we're catching back a little bit,
00:13:14: also compared to new entrants that we saw in the US and also in China.
00:13:19: How sustainable, in your view, is the in-house development model long-term?
00:13:26: I think it's most sustainable,
00:13:29: because only you can only lead what you understand.
00:13:33: And you can only be successful if you have a certain level of ownership.
00:13:40: And I mean, the automotive industry
00:13:42: transformed from doing everything by themselves
00:13:45: to having 80% of the value creation outside in manufacturing,
00:13:51: but also strongly in engineering.
00:13:54: And winning back engineering, software engineering,
00:13:58: as a core competency to differentiate yourself from others
00:14:03: and also to create a technological foundation
00:14:06: that is a value for shareholders,
00:14:11: but that is also a value in terms of workplace stability
00:14:14: because you have a skill others don't have
00:14:15: that allows you to differentiate, also differentiate products from competition,
00:14:20: but also within our group differentiate a Porsche from a Volkswagen,
00:14:25: from a Cupra, is something that you can do best
00:14:28: if you really know your business.
00:14:29: And in the fast-paced software business,
00:14:34: own development is imperative.
00:14:37: OK, can you provide for us some real-world examples
00:14:44: of how the new approach is delivering results?
00:14:46: I think the success in test reports,
00:14:55: I mean, our first EVs had
00:14:58: I mean the first TVs, they were sometimes seen critical by the media and also by the customers.
00:15:04: They improved massively. Customer experience has much improved not only in reliability,
00:15:09: but also in functionality. They sell extremely well. I would say this is real life and also
00:15:16: new functions added to the car, that you can play air console games in the latest version
00:15:22: of Volkswagen ID4 or of an Audi Q6 is something that if you're a kid or if you're just a game lover
00:15:31: is a real world improvement. Very good. Okay, we've got a question here from one of our live
00:15:38: viewers. This question is from Mariana Zarpalan. She asks, what is Karyan's strategy for third-party
00:15:45: app developers aiming to enter the automotive sector? First of all, we believe in the strength
00:15:54: of the developer community. This is also why we are really open to open-source approaches and using
00:16:02: them. On the app developer space, we have an in-house app store that we control that is available
00:16:09: to more and more customers. We're just launching it in the new next generation of Audi cars and
00:16:18: also Volkswagen cars. This is an Android-based app store, which allows existing applications
00:16:25: from the Android world to adapt them slightly for the automobile, for usability reasons mainly,
00:16:31: but also for safety and security reasons. This opens up the vehicle as a mobile device
00:16:39: to a large app developer community, even though it needs to go through the app store.
00:16:44: Thanks Peter. That's probably one more thought. We are one of the manufacturers who offer
00:16:53: Android Auto and Apple CarPlay to all our customers. If you really want to have your
00:17:00: phone ecosystem in the car, this opens up the whole world of app developers into the vehicle,
00:17:08: even though we believe that a fully integrated system has a lot of advantages because it's linked
00:17:13: to the vehicle functions. Thanks for clarifying. Thank you, Mariana, for the question. We love
00:17:19: getting questions from our live viewers. If you're shy and you're sitting on the fence, bring it out.
00:17:24: I will ask the question for you. You just have to type it in the chat. Peter, walk us through a
00:17:29: little bit why the specific software domains of autonomous driving, infotainment, and connectivity
00:17:35: were selected as priorities. What was the thought there? Because they're most customer-relevant,
00:17:40: especially on autonomous driving, the autonomous driving stack that we are developing in-house
00:17:47: and we're developing two of them, one in China for the Chinese market with Chinese customer
00:17:54: features with Chinese regulatory rules and one for the Western world together with Robert Bosch.
00:18:01: They will make driving even safer than if a human drives. Also in the assistant driving,
00:18:10: it gives much more safety and security. Plus, it adds a lot of comfort. If you have a very humanoid
00:18:17: driving style, you will feel comfortable, you will use it a lot. This differentiation
00:18:24: for the customer is one of the reasons why we're doing it ourselves. Plus, it's a core technology
00:18:30: that creates a lot of value. If you don't have it, you need to pay a lot of money to a partner,
00:18:37: get a technological and strategic lock-in, because there are only few players globally
00:18:44: who offer it. This is another reason why we're doing it. If you do it yourself, you will have a
00:18:50: cost advantage. Like in the past, where we had our double clutch gearbox, where we did ourselves,
00:18:56: it was better. It was cheaper and cost. It offered more customer advantage.
00:18:59: This is the strategy, especially if you have the scale that serves all stakeholders.
00:19:07: Okay, we've got another live question. Peter, this one is from a viewer called
00:19:12: Sandro. Sandro, I'm going to summarize this just a little bit. Sandro is asking,
00:19:16: a lot of people are talking about the RoboTaxi level four approaches of Tesla and Waymo.
00:19:21: What do you think of those? How does it compare to the automated driving development that you're
00:19:28: doing? RoboTaxi is a great thing. I think those of you who were in San Francisco lately and used
00:19:36: to Waymo, obviously realized that this technology is quite mature. With Volkswagen, we'll be second
00:19:46: to market in this era, our autonomous ID bus, which we are trialing under our Moja brand already
00:19:55: in Hamburg, and where we just signed the contract with Uber to deliver a significant number of cars
00:20:01: as an autonomous robot taxi is a really cool product that does very well. We realized this
00:20:09: with a partner with Mobile Eye. One key difference is level four technology is amazingly far today.
00:20:17: This is why we start offering it to customers, but it's also amazingly expensive in technology
00:20:24: that you put into the car. This is why it does not yet pay off for the private customer. You would
00:20:30: not want to afford such a vehicle, and one of Volkswagen Group's roles in the history of the
00:20:38: automobile was always democratizing technology, so that everyone could afford it, and that for
00:20:45: specific customers, premium customers like Audi or Porsche, it would be developed in a way that
00:20:52: it fits to their requirements. This is what we're doing, is developing autonomous driving technology,
00:20:58: not for robot taxis, but for cars that you own, that you personally use. It is easy to use,
00:21:05: that is safe to use without an education, and that is affordable. This is at the core of our group
00:21:14: as a strategy of becoming a global automotive tech driver, is bringing technology to the people.
00:21:21: May they be in China, the US, or Europe, and may they drive a small Skoda or Bentley?
00:21:28: Okay, thanks Peter, and thank you Sandra for that question. Great to get questions from our live
00:21:33: viewers on LinkedIn. Peter, can you elaborate a bit on that joint venture that you mentioned
00:21:38: with Shapong and Rivian? How do these joint ventures work in practice? Who controls what?
00:21:43: How can we imagine this? Both are a bit different, because we're also pioneering
00:21:48: collaboration models in the automotive industry. As I said, the traditional tier one model,
00:21:52: you're sending a spec to a couple of suppliers, then you select one, and then they deliver
00:21:56: is a story of the past for software. We still have these relationships, but they're reduced.
00:22:04: With Rivian, we indeed created, as forks one group, a joint venture, and we're just developing
00:22:10: together in that joint venture a shared software architecture, next generation, really cool for
00:22:15: the Western world. And the joint venture who is owned 5050 by Rivian and Fox one group will own
00:22:20: it and will commercialize it. And with Chopin, it's a different model. And with Chopin, we took
00:22:27: a license and we asked Chopin to train our code developers in exactly their architecture. Now
00:22:34: we own the architecture 100%. Our people already wrote 10 million lines of code and becomes 100%
00:22:41: carried aka Fox one group architecture in China for China. And that's also the special thing about
00:22:47: the China electronics architecture. We took a license, but now we're developing it into our own
00:22:53: in China for China architecture that is made for the Chinese customer and the Chinese market.
00:22:59: Peter, what do you see as the biggest structural challenge facing the European
00:23:06: software ecosystem today? And how can players like Karyad help shift the trajectory?
00:23:11: One of the biggest assets that we have in Europe is talent. We have excellent people, we have
00:23:21: excellent universities. We have an ecosystem of established companies. We have a great startup
00:23:32: culture, if you think in Germany about Unternehmertum in Munich, who launch 100
00:23:39: commercial startups per year. And I think the challenge is to transform that ecosystem into
00:23:51: the digital world, into the world of artificial intelligence, because AI is something we are
00:24:01: using in our autonomous driving stack. We are using in our customer interaction in the
00:24:07: vehicle and our digital assistance. And we need to pick up these core technologies in this ecosystem
00:24:15: and really own it. And the challenge is, are we fast enough? Are we going far enough? Are we
00:24:25: thinking about the opportunities and not only about the risks? The European AI Act is a great
00:24:32: example where we are thinking a lot about the risk and then taking a lot of documentation
00:24:38: and sometimes miss opportunities of fast development. Of course, we want the balance,
00:24:45: but these are the challenges we're having. But I think we are very, very well prepared
00:24:51: in taking technology from research into commercialized products, because we have
00:25:00: the right people in Europe. Peter, you spoke earlier about your own visit to Shanghai. We've
00:25:07: talked about a little bit about what Karyat is doing in China. Can lessons that Karyat has learned
00:25:13: from the Chinese market be translated to other regions? How are you thinking about that?
00:25:18: I think what we see in China is a very high openness to technology and to innovation
00:25:27: as a source of customer value, as a source of wealth, and as a huge opportunity. This technology
00:25:35: positive approach in the whole society is something that drives innovation, that creates also the
00:25:44: right talent, that creates a candle spirit, and that creates a tremendous development speed. Very
00:25:50: often in Volkswagen Group, we look at China's speed. So how fast can we develop a product in
00:25:58: China? And do we achieve the same speed in the rest of the world? And one of our competitive
00:26:06: advantages in Karyat and also in Volkswagen Group is that we are the only global OEM who has
00:26:13: engineering activities and real value creation activities in Europe, in the US, and in China.
00:26:21: So we have access to China as the biggest training center or gym for modern technology,
00:26:31: and we are able to learn for the rest of the world of how technology is done there. So China's speed
00:26:39: is certainly something that we are taking over in our rest of the world activities,
00:26:46: and it's really amazing to see if the spirit is right, how great the products are.
00:26:53: Yeah, you have to have the spirit right. Peter, speaking of spirit, we've had a last-minute
00:26:59: question from Bjorn Strasner. So Bjorn, thank you for the question. I'm going to just paraphrase
00:27:05: this in the interest of time. This is about the role of the cloud when it comes to development,
00:27:10: and he asked, can you perhaps expand a bit on Karyat's cloud-based cloud-first development
00:27:16: strategies versus traditional approaches? Is that something you can talk with us about today?
00:27:20: Yes. I mean, first of all, we are a cloud-first company. All of our developments are in the
00:27:27: cloud. Obviously, as I said, we operate the largest automotive cloud ecosystem with currently 45
00:27:35: million cars online 24/7 with not only customer functions running in the cloud, but also all
00:27:44: back-end functions running in the cloud. This is really amazing. It opens up, of course,
00:27:50: updateability of the cars. It also opens up, for example, in our latest models, if you ask
00:27:58: the voice assistant in the question that it can't answer, it passes it on to the cloud,
00:28:04: where a large language model, for example, ChatGPT in its largest version, runs and uses all the
00:28:10: compute power of the cloud and then gives an answer back into the car. And this is, in my eyes,
00:28:18: one of the key future paths in connecting the cloud with a vehicle, having some compute power
00:28:24: and AI power on the edge in the car and a larger compute and AI power in the cloud.
00:28:33: We call it hybrid AI that allows a whole lot of new customer functions. And cloud is a business
00:28:41: that we develop ourselves, control ourselves, because we believe that this is the key core
00:28:49: of the product. So not just the product you drive, but also all the data in the back end
00:28:55: and the connection to your mobile device, of course. And this is also a source where we are
00:29:00: getting better and better day by day. That's all anyone can ask for to improve a little bit
00:29:06: day by day. And Peter, we have asked for enough of your time. We appreciate you being here with
00:29:10: us on the IAA Mobility Visionary Club. It was a pleasure having you with us. We'll let you get
00:29:15: back to innovating and I hope to see you at the IAA in Munich in September. Will you be there?
00:29:20: We'll be there from day one and we'll celebrate automotive technology.
00:29:26: All right, we'll come by the main stage and I'll give you a high five. This has been so fun. Guys,
00:29:31: thank you for joining us for episode 12. We will be back in August for episode 13. I will catch you
00:29:37: that. Take care.
