Volkswagen AG is planning major investments in China to employ “several thousand” software engineers and catch up with local rivals when it comes to equipping cars with the latest digital technology, Chief Executive Officer Herbert Diess said.
“It’s probably not enough just to hire people from other companies,” Diess said in video posted this week on LinkedIn. “We are considering also big moves in China.”
Keeping up with offerings from Chinese manufacturers is becoming a challenge for Western automakers. The likes of XPeng Inc., Nio Inc. and BYD Co. are equipping their vehicles with karaoke microphones and sophisticated cameras for singing and streaming, while also providing connectivity to features such as in-car payment and social media.
Diess has identified software as a key differentiator. He regularly cites Nokia’s failure to keep up with the iPhone as a cautionary tale and has said self-driving functions will bring about an even more fundamental transformation of the industry than batteries.
China is Volkswagen’s biggest market and a key driver of its profit. The manufacturer delivered roughly 40% of its vehicles there in the first quarter. It employs more than 90,000 people in the country and operates over 40 vehicle and components factories along with partners.
Tapping into local tastes is crucial to win over customers in China, where electric-car adoption is accelerating and homegrown startups are quickly gaining scale.
“Developing this in Europe will not work,” Diess said. “We are going to have a software team in China, for China.”