Volkswagen Selects Microsoft Azure to Develop Software for AI Cars

By Mariliana Fotopoulou Thursday, February 11, 2021

Automotive company Volkswagen and tech giant Microsoft announced a deal to use Microsoft Azure’s cloud computing services to facilitate the software development efforts for vehicles powered by artificial intelligence (AI).

A Volksvagen dealership.

Volkswagen to Invest Billions in the Business for Car Digitalization

The German car business is currently developing AI cars for the future and other driver-assistance features, including adaptive cruise control that it plans to implement in current vehicles.

The company formed an independent subsidiary last year named “Car.Software” to improve the coordination among the carmakers within the broader Volkswagen company. Each company from the car business family designs the look and feel of the software independently, but they all collaborate on certain matters such as essential safety functions.

While these companies within the Volkswagen Group were utilizing different methods to design AI software, the deal with Microsoft will provide them with a common cloud provider, said Dirk Hilgenberg, chief executive of the Car.Software division.

“Over-the-air updates are paramount. This functionality needs to be there. If you can’t do it, you will lose ground,” Hilgenberg said.

Microsoft will also be responsible for bringing new AI features to the car through software updates, a system that has set Tesla apart from other car businesses. The company has previously struck a deal with Microsoft to connect its cars to Microsoft Azure cloud computing business service, and the new deal means that the software updates will be made on the same cloud that will then be downloaded to the cars.

Scott Guthrie, executive VP of cloud and AI at the tech business titan, said that for the company, the deal means that cars, which have a few driver-assistance features, will welcome new AI features over time that will bring them closer to self-driving.

“For our phones 15 or 20 years ago, when you bought it, it pretty much never changed. Now, we expected every week or every couple of days that, silently, there’s new features,” Guthrie said.

“That ability to start to program the vehicle in richer and richer ways, and in a safe way, transforms how the experience works. This is the next evolution of our foundational work with the Volkswagen Group to enhance their transformation as a software-driven mobility provider,” he added.

Volkswagen added in its statement that it plans to invest about €27 billion ($32.77 billion) in digitalization by 2025 and raise the proportion of in-house development of software in the car to 60% from the current 10%. The newly-formed Car.Software division will play an essential role in the company’s transformation into a software-driven mobility provider.

Research and Markets projects that tech business titans, such as Apple and Google, will increase their efforts to introduce cars to the world that are powered by AI.


Volkswagen Group announced the company has teamed up with Microsoft to use its cloud computing services to boost its software development efforts for AI-powered vehicles.

About the Author

Headshot of Mariliana Fotopoulou

Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.

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