XPeng’s in-house XNGP ADAS will be integrated into VW-branded EVs in China, with the initial vehicle set for production in 2026.
Recent reporting by Germany’s heise online claimed that Volkswagen Group (VW) has decided to halt in-house software development, repurposing its software arm CARIAD from R&D to a system integrator, prioritizing external solutions from partners such as XPeng and Rivian.
In response to speculation that it is abandoning self-developed software altogether, VW clarified that CARIAD will continue to serve as a core R&D unit within the group, focusing on key collaborative domains including advanced driver assistance systems (ADAS), in-car operating platforms, cloud connectivity and vehicle body control.
The company added that CARIAD will “adopt a new independent R&D model” to support local-market products. Its joint venture with Horizon Robotics, CARIZON, is scheduled to begin mass production of high-level ADAS capabilities by the end of this year.
VW’s software transition has faced multiple setbacks. Established in 2020, CARIAD was originally positioned as the backbone of the group’s digital strategy, but has struggled with development delays, cost overruns and quality control issues.
These difficulties have disrupted the rollout schedules of new Audi and Porsche models and culminated in a data breach affecting 800,000 EV owners in late 2024.
Between 2021 and 2022, CARIAD accumulated losses exceeding RMB 25 billion ($3.5 billion), in stark contrast to VW’s roughly €700 million ($760 million) investment for a 5% stake in XPeng.
Against the backdrop of stalled internal progress, VW has accelerated external partnerships over the past year. Beyond its joint venture with Horizon Robotics, Huawei’s ADS system has debuted in the Audi A5L, while Momenta’s solution has been deployed in the Audi E5 Sportback.
Meanwhile, XPeng’s proprietary XNGP ADAS will be integrated into VW-branded EVs in China.
The first models based on a jointly developed China Electronic Architecture (CEA) will serve as the backbone for all new VW EVs in the Chinese market, with the initial vehicle set for production in 2026.
VW’s latest statements signal that CARIAD is not being sidelined, but its role is shifting—from a standalone development hub to a systems orchestrator.
Looking ahead, VW is expected to pursue a hybrid strategy combining in-house and outsourced software, sourcing from multiple technology stacks.
In China, VW will rely primarily on XPeng and Huawei; in Europe, Rivian and Momenta may become key suppliers—potentially creating a multi-vendor architecture under a single brand umbrella.
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