Volkswagen Group CEO Herbert Diess is pushing executives at the automaker to come up with solutions to match Tesla's software expertise.
Diess says Tesla's has a competitive edge in electric cars and software is a threat to VW. In a recent webcast to VW executives, he voiced his concerns. "What worries me the most are Tesla's capabilities in assistance systems," Diess said.
Tesla is the only automaker with a software system that is constantly learning, he said. "500,000 Teslas function as a neural network that continuously collects data and offers the customer a new driving experience every 14 days, with improved features," Diess said. "No other car manufacturer can do that today."
VW has struggled with software problems in its ID3 compact EV, a Tesla Model 3 challenger, according to German press reports. The European launch of the ID3 is still on track for the summer, VW said earlier this month.
Diess said in the webcast that the integration of powerful new software into new models is a much higher hurdle for VW than electrifying its fleet.
Diess praised software updates with which Tesla "increases the range of its cars from 300 miles to 318 miles."
Small improvements such as that make a big impression on buyers, Diess said, adding: "Customers love it."
Tesla's vehicle access without keys, the bundling of many functions onto one screen and ease of use are also loved by Tesla customers, he said.
Diess is pushing the automaker's new Car Software business unit to implement a plan to catch Tesla. VW bundled its software activities into Car Software in January.
The unit is developing a vehicle operating system called "vw.os" that would be available to all VW Group brands. It would be used for assistance systems including highly automated driving, software functions for linking powertrains, chassis and charging technology, as well as ecosystems for mobility services and digital business models.