Transformations 2025: How Volkswagen prepares for the (driverless?) future

Echoing a growing sentiment in the auto industry, Volkswagen’s CEO Matthias Mueller warned last week of “a rapid and hard transformation” coming to the auto industry. He presented Volkswagen’s strategy “Transform 2025+” to cope with these changes. It includes major job cuts to prepare for the transition and many new initiatives.

But his strategy also shows how difficult it is to change the direction of the tanker which all major auto makers have become. Experience accumulated in the last 100 years, shared convictions and values make it difficult to adjust the focus and prepare for fundamental changes coming the industry. Many trends are currently competing for attention: electrification, mobility services, connected vehicles, digital platforms and finally the shift towards autonomous vehicles. It does not come as a surprise, that Volkswagen wants to become a leader in most of these topics:

It plans to establish an additional (thirteenth) major brand around mobility services. It wants to become a leader in electric vehicles. It has just established a digital lab to develop cutting-edge digital services related to mobility, connectivity, its brands and its products.

But the strategy fails to consider the tectonic shift which may be caused by autonomous vehicles and the way that self-driving car technology will affect the key aspects of the auto business. Mueller plans to lay the foundation for autonomous driving in the years from 2020 to 2025 and then have the necessary business models in place around self-driving cars after 2025. Given the rapid progress of the field, he may not have that much time.

But more importantly, self-driving car technology is associated with a very specific danger (and opportunity): It changes the dynamics of each of the auto industry’s strategic topics. Mobility services based on self-driving car fleets differ fundamentally from Uber’s, Car2Go’s and other mobility services fleets on parameters such as total cost per mile, optimal car model and characteristics, volume, utilization, profitability,  etc. Similarly electrification differs greatly whether it is targeted towards autonomous vehicles (which will initially predominantly be rolled out as elements of urban self-driving car fleets) or towards the consumer. The economic justification, battery cost, vehicle range, charging infrastructure requirements, innovation diffusion path and cost-effectiveness differ fundamentally!

A little bit of everything is not the right approach. Volkswagen, like most other auto makers, suffers from the problem hat it tries to address each and every strategic topic on its own without considering the relationships and interdependence with a paradigm-changing technology. Then, when autonomous vehicle technology enters the market they will find that the original assumptions no longer hold and that very little time remains to catch up and refocus the many different aspects of their business.

It is good that the auto industry is increasing their efforts to think about a radically different future. But they extrapolate forward from today to the next 5, 10, 15 years, and their thinking remains mostly rooted in the classic automobile world with a focus on volume leadership, consumer cars as primary product, traditional branding approaches, etc. However, in the face of transformational change, a different mode of analysis is needed: First the more distant future needs to be conceptualized, a future where autonomous vehicle technology has already matured, the current doubts and questions about viability, legality and acceptance have been overcome, self-driving vehicles are in the market and where laws and regulations have been updated (as we know they will) to allow productive use of the technology. The key aspects of this future need to be considered: Mobility service markets (separately for urban and non-urban regions, for local and long distance traffic), consumer segmentation and purchase decisions, impact on road infrastructure, impact on traffic flow (which will be enormous both for urban and for long-distance roads) and fleet management algorithms, truck, bus and autonomous machine markets. For such a future key changes (including the various types of mobility service business models) need to be calculated through in detail, using quantitative models. This analysis must be unencumbered by the current “realities” of the auto market. It must include the scenarios, business models and market dynamics that may entice investors to pour funds into promising opportunities.

After such an analysis, the focus can be turned back from the future to the present and the transition period. Many likely changes will become obvious and the paths and the relationships between the different technologies being considered today will be much clearer. For Volkswagen and all other auto makers it means allocating major resources to autonomous vehicle technology today: make sure that they catch up with the leaders in the space; prepare mobility services for  the autonomous fleet scenario rather than as also-run next to all the players already established in this field and make sure that they have electric vehicle models that can be used as backbone of self-driving car fleets.  Develop, consider and prioritize business models beyond consumer cars and fleet vehicles/mobility services, for trucks, buses, autonomous machines and beyond. Each of these activities is future-proof and establishes a beachhead  in the transition towards autonomous vehicles.

This is not a call to put all eggs into one basket. But auto makers need to take the fundamental changes that will be caused by self-driving car technology seriously and prepare to adapt to these new challenges today by making them a cornerstone of their strategy.

First fully autonomous Audi expected by 2017

Several news media have reported that Stefan Moser, Audi Head of Product and Technology Communications, has announced that the next generation Audi A8 (expected by 2017) will be able to drive with full autonomy. Mr. Moser emphasized that Audi wants to be first to bring a self-driving car to market. He explained that the car will be equipped with cameras and LIDAR, that the car will drive much safer than humans could, and that their system will be based on a redundant hardware architecture where all computing will be performed by at least two independent processors. He also cautioned that legal hurdles remain for fully autonomous driving which could delay the availability of these features.

This announcement shows that car makers increasingly want to be seen as innovation leaders in the autonomous driving space. Audi has a mixed record in this area. They have have been very active in the field of driving dynamics – i.e. racing a self-driving car up Pikes Peak or around the Hockenheim race track. But the sensing and route planning algorithms of these prototypes are still quite primitive – they rely mostly on differential GPS supplemented with custom-built 3D maps for navigation. Audi has made great progress in autonomous racing on empty tracks  but driving in a dynamic, changing environment with other vehicles, pedestrians, etc. is a different ball game. It does not help that Volkswagen’s CEO Martin Winterkorn remains quite sceptical about fully autonomous technology (Audi is a subsidiary of Volkswagen). On the other hand, Audi has established itself as a technology-leader with respect to the computing platform for driver-assistance systems via its partnership with NVIDIA.

We hope that Mr. Moser’s statements are an indication of a change of heart within Volkswagen and that they will aggressively tackle the challenges of autonomous urban and highway driving. This requires an extensive program of computer-based learning and optimization and needs millions of kilometers of test-driving with autonomous car prototypes on regular roads.

Source:, CarAdvice

Audi first automaker to receive Nevada test license for autonomous cars

After Continental reported their test license in Nevada in December, Audi USA now claims to have become the second recipient of a license for testing autonomous cars – before Continental and after Google. Audi’s driverless Audi TTS race car can now roll through Nevada. The car has been developed by Stanford University and the Volkswagen Electronics Research lab in Silicon valley. In their statement Audi introduces the somewhat misleading term ‘piloted’ driving and ‘piloted’ parking for their autonomous driving. Apparently they still have a hard time imaging a future without driver or pilot…

Source: Audi 1,2

Update 09 Jan: German newspaper FAZ reports from CES hat Audi was optimistic about the introduction of driverless cars and expects to see autonomous vehicles on the market before the end of this decade.




Intelligent vehicle symposium showcases advances in driverless technology

Driverless technology researchers gathered at the beginning of June for the IEEE Intelligent Vehicles Symposium. With almost 200 presentations from more than 600 authors probably no aspect of this technology was left untouched.

This was not just an academic get-together: many of the papers involved major car makers (BMW, Toyota, Daimler, Renault, Volvo, Opel, Volkswagen, General Motors, Hyundai) or automotive suppliers (Delphi, Bosch).

The conference started with a reportedly captivating keynote presentation by Google’s Chris Urmson. Unfortunately, I have not been able to obtain more detailed information about its content. Please contact me if you were there!! Robert Bertini (Intelligent Transportation Systems Lab) gave another keynote on the environmental issues related to intelligent transportation which took the perspective beyond technical issues towards societal and environmental impacts.

It is hard to pick out the most interesting papers. But Daimler presented a new approach for improving stereo vision using a ‘Stixel’-based approach for object recognition. They claim that they are able to reduce false positives by a factor of 8 over the state of the art while reducing the computational costs by a factor of 10.

China  also seems to be moving ahead with driverless technology. Two papers (1, 2) were presented from participants of the annual Chinese driverless vehicle competition (‘ Future Challenge of Intelligent Vehicles’) funded by their National Nature Science Foundation.

Several papers focused on pedestrian modeling and recognition. Volkswagen described their approach to systematically drive an autonomous car at the vehicle’s handling limits. DLR presented an approach to apply autonomous vehicles localization technology to trains.

The symposium was located in Alcala de Henares, Spain. It also included demonstrations of autonomous vehicle systems.

Stanford course on the Future of the Automobile

Intelligent vehicles were the main topic of a 1-unit Stanford course from April to June. The course included guest lectures from Volkswagen Research (pdf), Hyundai (pdf), Volvo (pdf) and Bosch (pdf) and addressed technical, legal and some societal aspects of autonomous vehicle technology.

The course was offered by Sven Beiker and Chris Gerdes, both from Stanford’s Center for Automotive Research (CARS). Some of the key insights provided in the class:

  • Carsharing would benefit a lot – autonomous vehicles could be used by carsharing service providers as soon as 2018
  • Completely autonomous vehicles might be available by 2030 (this somewhat contradicts expected use in carsharing by 2018)
  • Over your lifetime you will spend about 1000 days in a car!
  • Autonomous cars and inter-car communication systems should evolve together; however it is difficult to impose new standards
  • The technology is advancing quickly

It is interesting, however, that the economic and business impacts of driverless technology seem to have been mostly absent from the course presentations (with the exception of a few bullet points in the final session). Issues such as how driverless technology might impact the cost of mobility,  what impacts driverless cars would have on the structure of the car industry, and on new business models and services were not addressed.

Nevertheless this has been an excellent course. I highly recommend taking a look at the  syllabus and the many excellent course presentations in PDF format.



Volkswagen eT! concept explores application of driverless tech for postal trucks

Partnering with Germany’s postal service, Deutsche Post AG, Volkswagen Research Group has developed the concept of a delivery van Volkswagen eT! which can operate semi-autonomously. The driver can instruct the car to follow him – for example when making deliveries from house to house or to return to the driver for example from a parking spot. This concept provides provides a glimpse of how autonomous driving may alter some established business processes.

Volkswagen launches car-sharing service ‘Quicar’

Like Daimler and BMW, now Volkswagen positions itself in the car-sharing space. It will launch its ‘Quicar‘ car-sharing service in Hannover, Germany on November 16th with about 200 Volkswagen cars and initially about 50 stations where users can pick up the cars.

Costs run at about 0.20 euros per minute with a minimum of 6 euros. Volkswagen has developed their own telematics software and provides mobile phone apps for booking the cars.

This is an important move for the company and an acknowledgement of the looming threats to the established ownership-oriented business model which currently dominates the automotive industry. Car-sharing  is viewed more and more positively among the younger generation, but the more important reason (though not yet explicitly stated) may be that autonomous cars are on the horizon. Once they are introduced, they will greatly increase the appeal of car-sharing and significantly lower total mobility costs for car-sharing  customers. Car-sharing with autonomous cars is the business model of the future for the automotive industry: Volkswagen is making the first steps to prepare for this tectonic shift.

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