VW talks to Huawei about car licensing software in China

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Volkswagen has held talks to use Huawei software in its cars in China, hoping to ramp up efforts to claim a bigger share of the world’s largest electric vehicle market.

According to three people familiar with the situation, the automaker has entered into conversations with Huawei about using its technology VW vehicles, while another person said the German company had held similar talks with other Chinese groups.

VW’s software operation Cariad has been plagued by problems since its inception in 2020, including missed budgets and delays leading to delays in launching new electric vehicles such as the Q6 e-tron from Audi and the Macan from Porsche.

The turmoil led Oliver Blume, CEO of VW, to remove nearly all of Cariad’s top executives this month.

The VW Group, which includes brands such as Audi and Porsche, collectively sell more cars than any other manufacturer in China, but in the fast-growing and potentially lucrative EV market, the VW brand ranks ninth behind rivals such as Tesla and Warren BYD backed by Buffett, with a 2% market share.

In an effort to gain ground in the country’s electric vehicle market, the German group recently launched a Strategy “in China, for China”. and in recent years it has announced investments worth billions of euros in areas that include autonomous vehicles.

It has also been working to upgrade its existing operating platform with the sophisticated driver assistance and entertainment features that Chinese consumers have come to expect from the latest vehicles.

A move by VW to forge deeper ties with Chinese tech groups like Huawei it would come despite efforts by the US and Europe to reduce their exposure to China.

The tech giant has become a symbol of US-China tensions since Washington expressed concern that its telecommunications infrastructure posed a national security risk.

The United States has barred Huawei’s access to semiconductor technology and required special licenses for American groups to sell to the Chinese company.

Arno Antlitz, VW’s chief financial officer, told the Financial Times’ Future of the Car event last week that the next software platform for its premium brands such as Audi and Porsche would launch next year, while a driving platform planned autonomous was postponed to 2027 or 2028.

A person familiar with talks between VW and the Chinese companies said the discussions reflect “how big the problem is for a group like VW, whose [unique selling proposition] it is their scale and platforms.”

Another person said VW was also aware that a Chinese software partner could appeal to Chinese customers who are “pro-local and obsessed with [the] tale of technological self-sufficiency”.

Huawei did not respond to a request for comment.

VW said its “existing software [was] in continuous development,” but added that its China division was not in talks with any company about licensing a full operating system.

Tu Le, founder of Sino Auto Insights, a Beijing-based consulting firm, said the struggle of foreign automakers “to put something competitive on Chinese roads” has finally created an opportunity for Huawei.

“Huawei has only been able to partner with local Chinese brands, many of them with lower sales, but if they can secure a partnership with a major overseas [carmaker]legitimizes the technology and the brand,” he said.

However, a software outsourcing engineer on the Cariad team said VW needed sophisticated customization services to develop its operating system, which would be a test of the capabilities of Chinese technology companies.

“Whether VW has planned the kind of software they want, and whether Chinese technology companies can understand and meet the stringent demands of a German car company. . . these are hard to tell,” the engineer said.