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New VW CEO Oliver Blume faces software challenges as he takes helm from Diess

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New VW CEO Oliver Blume faces software challenges as he takes helm from Diess

Herbert Diess’s master plan for beating Tesla hinged on replacing factory workers with 10,000 software workers who would transform Volkswagen Group into a tech player.

Instead, after two years of VW electric car customers angrily stabbing at screens, Diess has been forced out. Porsche boss Oliver Blume, who started as VW Group CEO today, is an all car guy rather than software guru and got the job by being a team player and pragmatist.

VW will accelerate its transition toward EVs where possible, Blume said at an internal conference on Thursday, the first day of his tenure.

Blume told top managers he had developed a ten-point plan focusing on topics including financial robustness, sustainability, the capital market, and development in China and North America.

“I am a fan of e-mobility and I stand by this path … we will keep the current pace and, where possible, increase it,” Blume said, according to a copy of his speech.

VW must find the right rhythm for a stable transformation by defining and following through on a clear strategy, he added.

However, the probability that Blume will make dramatic changes early in his tenure is low, and that risks prolonging the software problems plaguing VW customers.

Drivers’ car displays are seizing up and even going blank. For owners to gain the ability to get over-the-air software updates of certain features — some of which may be safety-critical — VW is requiring many to drop their EV off for a day at the dealership.

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Infotainment systems reliant on software described as incomplete are making their way to more models, threatening VW’s position in sales and quality rankings.

‘Disease that is spreading’

“It’s the disease that is spreading,” Jake Fisher, senior director of auto testing at Consumer Reports, said in an interview. “I am talking about systems that, when you know how to use it, now it’s multiple steps to do something that used to be one button, and that is a shame. It’s moving backward and making these cars worse.”

Fisher was one of the more than a dozen testers or owners of VW’s ID series EVs and Tesla models in seven countries whom Bloomberg spoke with to get a sense of just how big a technological gap Blume has to close.

ID drivers complained about their cars suddenly braking because of a traffic sign detection system so buggy, they tend to just deactivate it; a smartphone app that is glitchy and lacking features; and challenges syncing their phone with their EV either wirelessly or with a cord.

“I had not expected to buy a car that was unfinished,” said Christopher Bergsten, a 31-year-old in Linkoping, Sweden, who sold his ID4 SUV after less than six months. “I expected way more.”

Diess started at VW in 2015, months before the diesel-emissions scandal that rocked the company to its core. He ascended to the top job three years later as the outsider who could clean up the mess. Almost immediately, Diess cut a check for an electric-vehicle battery order that almost matched Tesla’s market value at the time.

“I really liked what Diess did,” said Barry Holleran, a 47-year-old software engineer who was one of the first in Austria to take delivery of an ID4. “He really put his neck out to make this move, and I thought as a consumer I should support that.”

Holleran said his crossover is well-engineered and a good, comfortable family vehicle — VW’s long history of building automobiles shined through. But the software? “Dreadful.” Updates are infrequent and the navigation system does not work at all.

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“The saving grace is Apple CarPlay,” Holleran said. “If it did not have that, to be honest, I would get rid of the car and I would go with a Tesla.”

Early in Diess’s tenure as CEO, Tesla was in what Elon Musk memorably referred to as “production hell,” struggling to mass-produce Model 3 sedans.

For all the challenges the EV maker was having — Musk has said the company was weeks away from failing in 2018 — Diess recognized VW needed to massively expand investment in software capabilities.

One a-ha moment that year came when Consumer Reports initially denied a recommendation for the Model 3, saying it took longer to stop than the much larger Ford F-150 pickup.

Musk tweeted the next day that Tesla would maybe be able to shorten stopping distances through an over-the-air update. The following week, Consumer Reports recommended the sedan after all — braking improved by almost 20 feet.

Much as that episode turned heads across the auto industry, VW and its legacy peers have not deployed software updates nearly as frequently as Tesla.

Bert Steenbergen traded in his Skoda Kodiak for an ID4 early last year and has had two updates in the almost 20 months.

“The car was sold with a promise that every three months, there would be a software update. And that is not the case,” the 55-year-old former sales director for an energy company said. “They should be able to deliver the software, it’s not that complicated.”

Updating its vehicles every three months was part of VW’s long-term vision, said Benedikt Griffig, the automaker’s product and technology spokesman. “That was a misunderstanding when we started to announce OTA updates,” he said. “Our goal is also now with the ID family that we are bringing updates regularly to the customers. This is something we had to learn — it’s an agile process.”

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Incumbent automakers including VW are having to learn to be nimbler on several fronts to respond to Tesla, shifting to battery power from the tried and true internal combustion engines and to software from hardware.

“It’s easier to master electrification, since that is a different way of converting energy and one that makes vehicles less complex,” said Jan Becker, co-founder and CEO of Apex.AI, which has developed an operating system for automakers.

“Software is a completely new area of competence that needs to be built from scratch, not the ongoing development of existing skills.”

VW stumbled right out of the gate with its ID models. A software unit that Diess started when he was head of the brand set out in late 2016 to build the operating system for the vehicles and several follow-on models derived from their modular architecture.

The initial EV of the series, the ID3, only started deliveries on time in 2020 because early buyers agreed to wait months for certain software-dependent functions to work.

During the summer of that year, VW started a group-wide operation that at the time was called Car.software.org. Within weeks, there was an abrupt personnel change: Audi CEO Markus Duesmann took charge, replacing an executive Diess had named to lead the VW group’s digital efforts. The unit was renamed Cariad in March of last year and put under Diess’s purview in December.

In-depth assessment

Taking on that responsibility proved costly. Duesmann commissioned McKinsey to give VW an in-depth assessment of where its software efforts stood, according to people familiar with the matter.

The results, reported by Manager Magazin this May, were bleak: Cariad’s decision-making structure was found to be ineffective, budgets had ballooned and delays were going to set back launches of important Porsche and Audi models.

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The report contributed to the billionaire Porsche and Piech family that majority-owns VW deciding in late July to oust Diess, according to the people, who asked not to be identified discussing private deliberations.

Blume, an engineer with VW pedigree who led Porsche during the launch of its first electric car, could have some changes up his sleeve.

Whereas Diess had emphasized the need for VW to go it alone building its own software platforms for its mass-market and premium brands, Blume has been more open to working with nimble software partners that promise faster solutions. Porsche has cooperated closely with Apple, which mentioned the brand in June as being among the automakers that will integrate a new version of its CarPlay system.

“It’s normal for the build-up of a company to be an onerous process,” Blume said of Cariad in an interview VW posted to its website. “We will assess everything with an open mind and develop a swift implementation plan.”

For the time being, some 200,000 ID drivers are having to book drop-offs at dealerships for a hardware fix that will enable over-the-air updates to their infotainment and battery-management systems.

VW needs to replace the 12-volt battery that acts as a secondary power source to the lithium-ion pack underneath the vehicle. There is risk the current one does not have enough power to see through software downloads lasting several hours.

This fix is coming too late for some customers. David Staruch, a VW ID3 owner in Bratislava, Slovakia, wrote to Diess in February after his car rapidly began to brake on its own while he was attempting to overtake a slower truck. He was convinced a major accident may have happened had he not stayed calm and slammed the accelerator pedal.

Staruch no longer relies on his ID3’s driver-assistance functions. “It’s a trust that is lost, and it will be hard for them to convince me again,” he said.

Lower satisfaction ratings

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Jocellyn Juanillo, a 29-year-old who recently earned her master’s in social work and has been working as a Lyft driver while she searches for a job in her field, said riders keep marking her down in satisfaction ratings because she has had to ask them to pull up a navigation app on their phone when her ID.4 screen goes blank. Once they reach the destination, she says the child locks often malfunction and trap customers in the car.

“If I could just on the spot trade it with someone and give them the keys, I would,” said Juanillo, who is talking with her dealer about a possible buyback or trade-in.

Misgivings about VW’s software lagging behind led Gao Zhao, a finance manager in Shanghai, to spurn an ID6 he has tested in favor of the Model 3 he has owned for two years. He believes the German automaker is trailing not only Tesla, but also Chinese upstarts.

“It’s just like when Nokia attempted to launch a smartphone system to compete with Apple,” Gao said. “It’s just quite awkward.”

Reuters contributed to this report

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Tesla autopilot recalls: 2 million vehicles need to have their defective systems fixed

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Tesla autopilot recalls: 2 million vehicles need to have their defective systems fixed

DETROIT (AP) — Tesla is recalling nearly all vehicles sold in the U.S., more than 2 million, to update software and fix a defective system that’s supposed to ensure drivers are paying attention when using Autopilot.

Documents posted Wednesday by U.S. safety regulators say the update will increase warnings and alerts to drivers and even limit the areas where basic versions of Autopilot can operate.

The recall comes after a two-year investigation by the National Highway Traffic Safety Administration into a series of crashes that happened while the Autopilot partially automated driving system was in use. Some were deadly.

The agency says its investigation found Autopilot’s method of making sure that drivers are paying attention can be inadequate and can lead to “foreseeable misuse of the system.”

The added controls and alerts will “further encourage the driver to adhere to their continuous driving responsibility,” the documents said.

But safety experts said that, while the recall is a good step, it still makes the driver responsible and doesn’t fix the underlying problem that Tesla’s automated systems have with spotting and stopping for obstacles in their path.

The recall covers models Y, S, 3 and X produced between Oct. 5, 2012, and Dec. 7 of this year. The update was to be sent to certain affected vehicles on Tuesday, with the rest getting it later.

Shares of Tesla slid more than 3% in earlier trading Wednesday but recovered amid a broad stock market rally to end the day up 1%.

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The attempt to address the flaws in Autopilot seemed like a case of too little, too late to Dillon Angulo, who was seriously injured in 2019 crash involving a Tesla that was using the technology along a rural stretch of Florida highway where the software isn’t supposed to be deployed.

“This technology is not safe, we have to get it off the road,” said Angulo, who is suing Tesla as he recovers from injuries that included brain trauma and broken bones. “The government has to do something about it. We can’t be experimenting like this.”

Autopilot includes features called Autosteer and Traffic Aware Cruise Control, with Autosteer intended for use on limited access freeways when it’s not operating with a more sophisticated feature called Autosteer on City Streets.

The software update will limit where Autosteer can be used. “If the driver attempts to engage Autosteer when conditions are not met for engagement, the feature will alert the driver it is unavailable through visual and audible alerts, and Autosteer will not engage,” the recall documents said.

Depending on a Tesla’s hardware, the added controls include “increasing prominence” of visual alerts, simplifying how Autosteer is turned on and off, and additional checks on whether Autosteer is being used outside of controlled access roads and when approaching traffic control devices. A driver could be suspended from using Autosteer if they repeatedly fail “to demonstrate continuous and sustained driving responsibility,” the documents say.

According to recall documents, agency investigators met with Tesla starting in October to explain “tentative conclusions” about the fixing the monitoring system. Tesla did not concur with NHTSA’s analysis but agreed to the recall on Dec. 5 in an effort to resolve the investigation.

Auto safety advocates for years have been calling for stronger regulation of the driver monitoring system, which mainly detects whether a driver’s hands are on the steering wheel. They have called for cameras to make sure a driver is paying attention, which are used by other automakers with similar systems.

Philip Koopman, a professor of electrical and computer engineering at Carnegie Mellon University who studies autonomous vehicle safety, called the software update a compromise that doesn’t address a lack of night vision cameras to watch drivers’ eyes, as well as Teslas failing to spot and stop for obstacles.

“The compromise is disappointing because it does not fix the problem that the older cars do not have adequate hardware for driver monitoring,” Koopman said.

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Koopman and Michael Brooks, executive director of the nonprofit Center for Auto Safety, contend that crashing into emergency vehicles is a safety defect that isn’t addressed. “It’s not digging at the root of what the investigation is looking at,” Brooks said. “It’s not answering the question of why are Teslas on Autopilot not detecting and responding to emergency activity?”

Koopman said NHTSA apparently decided that the software change was the most it could get from the company, “and the benefits of doing this now outweigh the costs of spending another year wrangling with Tesla.”

In its statement Wednesday, NHTSA said the investigation remains open “as we monitor the efficacy of Tesla’s remedies and continue to work with the automaker to ensure the highest level of safety.”

Autopilot can steer, accelerate and brake automatically in its lane, but is a driver-assist system and cannot drive itself, despite its name. Independent tests have found that the monitoring system is easy to fool, so much that drivers have been caught while driving drunk or even sitting in the back seat.

In its defect report filed with the safety agency, Tesla said Autopilot’s controls “may not be sufficient to prevent driver misuse.”

A message was left early Wednesday seeking further comment from the Austin, Texas, company.

Tesla says on its website that Autopilot and a more sophisticated Full Self Driving system are meant to help drivers who have to be ready to intervene at all times. Full Self Driving is being tested by Tesla owners on public roads.

In a statement posted Monday on X, formerly Twitter, Tesla said safety is stronger when Autopilot is engaged.

NHTSA has dispatched investigators to 35 Tesla crashes since 2016 in which the agency suspects the vehicles were running on an automated system. At least 17 people have been killed.

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The investigations are part of a larger probe by the NHTSA into multiple instances of Teslas using Autopilot crashing into emergency vehicles. NHTSA has become more aggressive in pursuing safety problems with Teslas, including a recall of Full Self Driving software.

In May, Transportation Secretary Pete Buttigieg, whose department includes NHTSA, said Tesla shouldn’t be calling the system Autopilot because it can’t drive itself.

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AP Technology Writer Michael Liedtke contributed to this story.

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Ford to build $3.5B electric vehicle battery plant in Mich.

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Ford to build $3.5B electric vehicle battery plant in Mich.

Ford Motor Co. plans to build a $3.5 billion factory in Michigan that would employ at least 2,500 people to make lower-cost batteries for a variety of new and existing electric vehicles.

The plant, to be built on land being readied for industrial development about 100 miles (160 kilometers) west of Detroit, would start making batteries in 2026. It would crank out 35 gigawatt hours worth of batteries, enough to supply 400,000 vehicles per year, Ford said.

The factory near the city of Marshall would produce batteries with a lithium-iron-phosphate chemistry, which is cheaper than the current nickel-cobalt-manganese chemistry now used in many EV batteries.

Consumers could then choose between a battery with lower range and cost, or pay more for higher range and power. The company wouldn’t give any prices just yet.

“The whole intent here is to make EVs more affordable and accessible to customers,” said Marin Gjaja, chief marketing officer for Ford’s electric vehicles.

Ford says a wholly owned subsidiary would own the factory and employ the workers. But China’s Contemporary Amperex Technology Co. Limited, or CATL, which is known for its lithium-iron-phosphate expertise, would supply technology, some equipment and workers.

The announcement comes at a time when U.S.-China relations are strained, and the Biden administration is offering tax credits for businesses to create a U.S. supply chain for EV batteries. To get a full $7,500 per vehicle U.S. tax credit to customers, EV batteries won’t be able to have metals or components from China in them.

Ford is hoping that the structure of the deal will defuse criticism of spending tax incentive money on a joint-venture factory that would be part-owned by a Chinese company. Last month the state of Virginia dropped out of the race for the same Ford plant after Gov. Glenn Youngkin characterized the project as a “front” for the Chinese Communist Party that would raise national security concerns. At the time Virginia had not offered an incentive package to Ford.

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The company expects to take advantage of U.S. factory tax credits, and says that buyers initially would get at least $3,750 in tax credits because the vehicles are produced in North America. Gjaja said that over time they could get the full $7,500 credit depending on sourcing of battery minerals.

Lithium-iron-phosphate batteries would go into standard-range versions of Ford’s EVs. For instance, the lowest price Mustang Mach-E electric SUV would get an LFP battery and would be able to travel 247 miles per charge. The long range version of the Mach-E will have a nickel-cobalt-manganese chemistry that takes it to 310 miles per charge.

The plant was revealed Monday at a meeting of the Michigan Strategic Fund, which approved a large tax incentive package for the project near the junction of Interstates 94 and 69.

About $210 million came from Michigan’s Strategic Outreach and Attraction Reserve Fund, known as SOAR, set up to lure industry and jobs to the state. But the total size of the incentive package wasn’t clear.

The SOAR Fund has received nearly $1.8 billion from the state’s general fund since it was first created in December of 2021.

A tax-relief bill passed in the Michigan House last week could send up to $1.5 billion over three fiscal years to the SOAR Fund in addition to an $800 million one-time deposit that Gov. Gretchen Whitmer outlined in her budget proposal last week.

The tax-relief bill, which still needs state Senate approval, has been heavily criticized by Republicans for giving too little to taxpayers and too much to large corporations.

Last summer, Ford announced that CATL will make lithium-iron-phosphate battery packs for Mustang Mach-E electric SUVs in North America this year and for F-150 Lightning electric trucks early in 2024 “creating more capacity for high-demand products.” The batteries at first would come from China, then be switched to the Michigan plant in 2026, Ford said.

The company expects to be able to produce electric vehicles at a rate of 600,000 per year by late this year.

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Whitmer said the plant will bring “generational opportunities” for west Michigan families. It will “make sure that production lines aren’t stalled by global shocks or shipping delays,” she said.

Lithium-iron-phosphate batteries already are in use in consumer electronics and some competitors’ vehicles, but all the batteries are imported, said Lisa Drake, vice president of industrialization for Ford’s electric vehicles.

“This project is aimed at de-risking that by actually building out the capacity and capability to scale this technology in the United States,” with Ford controlling the manufacturing and the workforce.

Conrad Layson, senior analyst with AutoForecast Solutions, says the new battery factory could supply multiple Ford models. “As Ford increases the number of all-electric nameplates, the output from this factory could be used to make lower-cost versions of those future all-electric Ford vehicles,” he said.

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Associated Press Writer Corey Williams contributed to this report.

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Tesla hikes price of Model Y after US alters tax credit rule

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Tesla hikes price of Model Y after US alters tax credit rule

DETROIT (AP) — Tesla has raised prices on its Model Y in the U.S., apparently due to rising demand and changes in U.S. government rules that make more versions of the small SUV eligible for tax credits.

The Austin, Texas, electric vehicle company bumped up the price of the Model Y Long Range version by about 2% to $54,990 and the Performance version by about 2.7% to $57,990, according to its website. The prices exclude shipping and an order fee.

The moves, made Friday, come three weeks after Tesla cut prices nearly 20% on some versions of the Model Y, the company’s top-selling vehicle. The price cuts were made to boost sagging demand, and also to make more versions of the Model Y eligible for the $7,500 electric-vehicle tax credit in the Inflation Reduction Act. The full tax credits will be available at least into March.

On Friday, The Treasury Department revised vehicle classification definitions to make more EVs — including SUVs made by Tesla, Ford and General Motors — eligible the full $7,500.

The change came after lobbying by automakers that had pressed the Biden administration to change vehicle definitions to allow higher priced vehicles to qualify for a maximum credit. Tesla CEO Elon Musk met with top aides to President Joe Biden last week to discuss the EV industry and the broader goals of electrification.

Under the sweeping law approved last summer, pickup trucks, SUVs and vans with a sticker price up to $80,000 qualify for EV tax credits, while new electric cars, sedans and wagons can only be priced up to $55,000. The rule had disqualified some higher-priced SUVs, such as GM’s Cadillac Lyriq and some versions of the Model Y, prompting complaints from Tesla and other automakers.

The January price cuts apparently worked. On Tesla’s earnings conference call last week, CEO Elon Musk said that so far in January the company had seen the strongest number of orders year-to-date in company history. He also said the company had raised the Model Y price “a little bit in response to that.”

After Tesla’s price cuts, Ford responded by reducing the price of its Mustang Mach-E, in part to qualify for the tax credit and also to spur buyer interest. But crosstown rival General Motors said it had no plans to cut EV prices.

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The EV tax credits are among a host of changes enacted in the Inflation Reduction Act, which Congress approved in August with only Democratic votes. The law is designed to spur EV sales as part of a broader effort to reduce planet-warming greenhouse gas emissions.

But a complex web of requirements, including where vehicles and batteries must be manufactured to qualify, has cast doubt on whether buyers can receive the full $7,500 credit.

The Treasury Department said Friday that it hopes to make it easier for consumers to know which vehicles qualify for the credit. Under the revised rule, vehicle classifications will be determined by a consumer-facing fuel economy labeling standard, rather than a more complicated formula set by the Environmental Protection Agency, Treasury said.

A message was left Saturday seeking comment from Tesla on the price increases. The increases were reported Friday night by Bloomberg News.

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