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VW CEO: Europe, Not Silicon Valley Should Take the Lead in Auto Tech

January 26, 2016, 8:52 PM UTC
Lower Saxony Governor Weil Visits Volkswagen Factory
WOLFSBURG, GERMANY - OCTOBER 21: New Volkswagen Group Chairman Matthias Mueller speaks to the media with Volkswagen Work Council head Bernd Osterloh and Lower Saxony Governor Stephan Weil (both not pictured) while standing at the assembly line of the Volkswagen factory on October 21, 2015 in Wolfsburg, Germany. The three toured the plant and met with workers as Volkswagen continues to struggle through the wake of the Volkswagen diesel emissions scandal. The company installed software that cheats during emissions test into 11 million of its diesel cars sold worldwide. (Photo by Sean Gallup/Getty Images)
Photograph by Sean Gallup — Getty Images

Volkswagen CEO Matthias Müller pushed European companies and policymakers this week to mobilize and supplant Silicon Valley as the leader in electric vehicles and autonomous tech.

“We must not leave this playing field to Silicon Valley,” Müller said during a company reception Monday in Brussels, adding that Europe should set the course in digitization, autonomous driving, and electric mobility—as well as with the infrastructure and legislation supporting this mission.

“A true breakthrough for electric mobility will only be achieved if politics, society, and authorities work together more closely,” he said. However, he noted Europe lacks infrastructure, and desperately needs an extensive network of rapid charging stations to compete on the road ahead.

Müller, appointed VW’s CEO after the automaker admitted to rigging diesel emissions tests in the U.S., also said the company’s brands will introduce about 20 additional models with electric or plug-in hybrid drive trains by 2020. For instance, in the past several months, Audi and Porsche, both owned by Volkswagen Group (VLKAY), have announced plans to develop EVs. Audi will produce an all-electric SUV by 2018; and Porsche is spending at least $1 billion to develop an all-electric sports car.

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Wherever they’re based, automakers have a conflicted relationship with Silicon Valley’s startup culture and potential for disruption. In recent years, the Valley has overshadowed Detroit and Germany, where innovations in the automotive industry have historically emerged. During a recent trip to California, Daimler CEO Dieter Zetsche even revealed that was surprised by the progress that Apple and Google have made on automotive projects.

As a result, automakers have responded with a dual approach: try to beat them, and join them.

For instance, Daimler-owned Mercedes-Benz, along with American automakers Ford (F), GM (GM), are just a few that have opened research and development centers in Silicon Valley, in an effort to tap into the talent pool there.

Ford CEO Mark Fields says why the automaker is in Silicon Valley:

Meanwhile, the companies have also tried to show that all innovation doesn’t occur in Silicon Valley. Earlier this month at CES, the annual consumer electronics trade show in Las Vegas, GM, Ford, and German automakers all took jabs at automotive upstarts like Tesla Motors (TSLA) and Google (GOOG). German automakers also showcased their efforts to develop autonomous vehicles using mapping technology from BMW, Daimler, and Volkswagen-owned HERE, not Google Maps.

GM CEO Mary Barra even took a swipe at Tesla in her CES keynote, as she introduced the company’s all-electric Chevrolet Bolt. “Bolt EV customers never have to worry about driving to another state to buy, service or support their vehicle,” she said. Tesla, which doesn’t use dealers, is banned from selling directly to consumers in several states.

But the automotive industry’s reaction to Silicon Valley only illustrates its influence in the automotive world. Five years ago, few would have predicted that major automakers would make serious efforts to move beyond their traditional businesses of making, selling, financing, and servicing cars—areas where auto tech startups have thrived. In just the past month, GM has invested $500 million into ride-hailing app Lyft and launched a car-sharing service called Maven, while Ford announced a pilot program that will allow up to six people to lease the same car.

Meanwhile, back in Europe, VW’s business strategy is in the midst of a revolution, thanks largely to the emissions scandal that erupted in September 2015. It’s not entirely clear what this new VW will look like, beyond a newfound interest in electric vehicles. Müller will present VW’s new strategy—which will outline plans through 2025—this summer.