When Volkswagen executives arrived at an internal conference in October, few would have expected to be greeted by the face of “surprise guest” Elon Musk. The Tesla Chief Executive was dialled into the event held in Alpbach, Austria, by the Group’s Chief Executive Herbert Diess to discuss Tesla’s approach to innovation and even Musk’s personal management style.
The move quickly turned automotive industry heads. Initially, it seems strange for Diess to have extended a friendly hand to the head of the company he describes as Volkswagen’s strongest competitor. But in reality, the two have a friendly, if competitive relationship. Musk reportedly offered Diess the Chief Executive role at Tesla in 2015 before he accepted the stewardship of Volkswagen. And in 2020 the two took an electric ID.3 for a test drive at Braunschweig Wolfsburg Airport, not far from the German company’s headquarters.
Many automakers are increasingly aware of just how complex and expensive it will be to realise the next generation of mobility solutions
In industries just beginning to be disrupted by upstart innovators, it is not unheard of for rivals to share a stage. In Apple’s early days, for example, it worked closely with Google, integrating its technology into the iPhone. Google Chief Executive Eric Schmidt served on Apple’s board of directors at the time and was even invited to address the audience during Steve Jobs’ keynote address at a 2007 conference. But when Google began to produce its own mobile phones, the two fell out spectacularly. “I’m going to destroy Android, because it’s a stolen product,” Jobs said, according to journalist and author Walter Isaacson’s biography.
How far should industry watchers expect the relationship between Musk and Diess to go? Many automakers are increasingly aware of just how complex and expensive it will be to realise the next generation of mobility solutions. In the October meeting, Diess lauded Tesla’s response to the microchip crisis—quickly redesigning its software, allowing it to use different chips—as one example of its agile approach. For established automakers, transforming their business models away from the internal combustion engine and towards battery electric vehicles is challenging enough without the likelihood of supply chain issues stretching into 2022 and beyond.
Cooperation of the kind advocated by the late Sergio Marchionne could make that transition a little easier. Strategic alliances, like that of Renault-Nissan-Mitsubishi, allow manufacturers to achieve more together than they could apart. But these interdependent alliances also create vulnerability; if one party is undermined, all are likely to suffer. And personal partnerships, like that of Apple’s Jobs and Google’s Schmidt, rests on the interests of their respective companies. Executives can be the best of friends, until all of a sudden they aren’t.
Musk may be a publicity machine, but he’s still seen by some in the automotive space as an ambitious joker
Both Diess and Musk have something to gain from the appearance of warm relations. Musk may be a publicity machine, but he’s still seen by some in the automotive space as an ambitious joker. This was a chance to tell the world he’s not just a technology geek but a leader too, and one sufficiently interested in supply chains and production issues to mark Tesla out as a genuine innovator. An implicit endorsement of his approach from one of the sector’s most important leaders could do wonders for his credibility.
Diess benefits even more from the interaction. In July 2019, former BMW Chief Executive Harald Kruger resigned after being blamed for allowing Volkswagen to achieve an advantage in EVs. As more and more automakers take up EV transformation, Diess will want to avoid the same fate. To make that happen, countering internal opposition will be vital. Since Diess resigned his role as Chief Executive of the group’s Volkswagen brand in June 2020—now serving as Group Chief Executive—he has more capacity do so.
By consulting with one of the industry’s most ardent EV advocates in Elon Musk, Diess may or may not be laying the groundwork for a formal partnership on EVs. But far more importantly, he has sent a clear message to executives and stakeholders that Volkswagen’s electric revolution is here to stay.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Jacob Moreton is Business Journalist at Automotive World
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