Volkswagen CEO Hebert Diess has admitted that Tesla has a significant lead when it comes to software and its use in its self-driving program, according to leaked internal communications.

Tesla pioneered over-the-air software updates in the auto industry.

At first, it was touted more as a smartphone-like feature that enables your car to have a better user experience over time.

However, Tesla’s use of over-the-air software updates has evolved, and it is also now at the center of the automaker’s effort to achieve a fully self-driving system.

Volkswagen is recognizing that, and its CEO, Hebert Diess, is apparently “worried” about it.

The German magazine Automobilwoche obtained internal communications at Volkswagen from the CEO talking about Tesla’s software, which he admits is ahead of its own and “any other automobile manufacturer.”

In the internal communications, Diess says that Tesla’s lead gives him “headaches.”

He conceded that customers appear to love Tesla’s deep software integration with features like using your phone to control the vehicle and building the user experience around a center screen inside the car.

But what is of greater concern for VW’s CEO is Tesla’s use of software in its Autopilot program:

What worries me the most is the capabilities in the assistance systems. 500,000 Teslas function as a neural network that continuously collects data and provides the customer a new driving experience every 14 days with improved properties. No other automobile manufacturer can do that today.

Diess is referencing the fact that unlike most automakers and tech companies working on autonomous driving, Tesla doesn’t only rely on an internal test fleet or simulations to collect data for its Autopilot program, which it ultimately hopes will lead to a full self-driving system..

Tesla is leveraging its large customer fleet of electric vehicles equipped with an extensive array of sensors to collect data and improve its driver-assist features.

We recently reported on Tesla accumulating over 3 billion miles of Autopilot data.

In order to address Tesla’s software lead, the VW boss says that he is putting together a new software organization to “implement the Tesla catch-up plan.”

VW has already been building a lot of similar software features found in Tesla vehicles for its new ID3 electric car, but the German automaker is reportedly having “massive” software problems with the new electric car.

Some analysts believe that part of the reason why Tesla has a large valuation is that it is valued like a software company.

In the leaked communications about Diess’ concerns over Tesla’s software lead, the CEO presented his top managers with a graph that compared Tesla’s valuation to VW’s, which happens to be about half of the California-based electric automaker’s.

‘And that despite our valuable brands like Porsche, Audi, VW, Bentley, and the others,’ added Diess.

The CEO admitted that they still have a “long way” to catch up to Tesla.

While he has never been as blunt about Tesla’s lead as in those new internal comments, Diess has talked about Tesla’s advantages in the past, but he always made it clear that he believes VW will catch up to the automaker.

Electrek’s Take

I’ve driven dozens of new EVs from established automakers, and it’s painfully clear that Tesla has a massive advantage when it comes to software-based user experience.

But I love to see those comments from VW. Yes, Tesla has a giant lead over the rest of the industry when it comes to software, but the first step for other automakers to close that lead is to admit that they are behind.

If you are to look up to someone in that space, it has to be Tesla.

As for using its fleet to gather data for autonomous driving, I think it might be the first time another automaker has admitted that this is a strong advantage.

Most, if not all, of them have been relying on test fleets and simulation.

Are we going to see VW and maybe even more automakers taking a similar approach as Tesla on that front? What do you think? Let us know in the comment section below.

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