VW's Diess sees autonomy transforming cars more than electrification

Volkswagen Group is undergoing the world's largest industrial overhaul for the electric-vehicle age, plotting half a dozen battery plants just in Europe and retooling assembly lines around the globe.

And yet, its CEO sees autonomous-driving technology bringing about an even bigger shift.

"This change will transform the industry more than EVs or the electrification does," VW Group CEO Herbert Diess said in an interview for Bloomberg's Qatar Economic Forum. "The car becomes so different when it’s driving autonomously."

Diess's view may surprise some auto industry observers, given the breadth of VW's electric revamp and the level of disillusionment that has set in for autonomous-vehicle technology.

While Google's Waymo started offering driverless rides in robotaxis late last year, the service is limited to the Phoenix suburbs. Other companies including Tesla Inc. and Ford Motor Co. have made predictions about the technology's readiness that have not panned out. Uber Technologies and Lyft  both reached deals recently to sell their self-driving units.

While development is taking longer than many expected, automakers and technology firms are continuing to plow billions into trying to automate driving. The consulting firm AlixPartners expects the cost of highly and fully autonomous systems to drop at least 60 percent by 2030 and enable broader use cases.

With probably 10-times more lines of code than what is on a smartphone, cars are already software products and will be "the most sophisticated internet device you can imagine" when they are rendered driverless, Diess said.

VW is working toward offering autonomous driving in key markets worldwide. Joint efforts with Ford and affiliate Argo AI  in the U.S. are making good progress, Diess said. In China, VW's largest market, the automaker has partnered with local tech companies to be among the first to offer autonomous driving, mostly in private cars.

Regulation in Europe has improved recently, Diess said. VW announced last month that it plans to offer a highly automated version of the hippie-era microbus it is reviving as an electric van and will start test drives in Hamburg this year.

VW is spending about 2.5 billion euros ($3 billion) a year on boosting its software capabilities. Although Diess acknowledged there is "still a lot missing" to turn Europe’s largest automaker into a software powerhouse, he argued the industrial giant shouldn’t be counted out.

"We are in quite a good position to remain a very strong player in this future automotive world, in 'new auto,' as we call it," Diess said.