Volkswagen's CEO Herbert Diess is stepping down and will be succeeded by Porsche boss Oliver Blume, Europe's top carmaker said on Friday, after a four-year tenure in which Diess pushed VW's electric vehicles ambitions and clashed with its work council and board.

Sources with knowledge of the matter said the Porsche and Piech families, who own over half the voting rights and a 31.4% equity stake in Volkswagen, pressed for a change at the helm.

"Diess was incorrigible. He significantly changed Volkswagen - for the better. But his communication was miserable," one source said, asking not to be named.

Diess will leave his role on September 1, three years ahead of the end of his contract in 2025.

Oliver Blume, at VW Group since 1994 and chair of Porsche's board since 2015, will retain his position at Porsche alongside his new responsibilities "including in the event of a possible IPO", a statement said.

Diess' future at Volkswagen has been in doubt on multiple occasions after communication missteps which angered the workers' council, most recently in autumn last year after he stated a mismanaged transition to electrification could cost the carmaker over 30,000 jobs. He was also lambasted for his frequent public warnings that Volkswagen was falling behind Tesla.

The instability eventually weighed on Volkswagen's market value which has been on a downward spiral since early 2021.

Workers' council chief Daniela Cavallo had warned that support for the extension of Diess' contract would depend on whether he could keep Volkswagen at the forefront of Europe's car industry.

In what could be taken as a warning to Diess' successor, Cavallo said in a statement on Friday that "job security and profitability are "equally important".

In Europe, Volkswagen is ahead on electric vehicle (EV) sales with roughly 25% market share compared to Tesla's 13%.

But whether it will remain in first place is unclear, with its production times for an EV currently three times longer than Tesla's and a new electric-only factory not set to open until 2026.

The German carmaker has struggled in particular with progressing on software, with its two-year old software unit Cariad - which Diess took responsibility for on the board in December - far exceeding its budget and years behind on goals to roll out a more developed software platform.

Executives have pegged a possible IPO of Porsche in the fourth quarter as a means to fund Volkswagen's makeover as an electrification-oriented carmaker spanning software, batteries and cars, though poor market conditions mean a listing could bring in billions less than originally hoped.

Diess, in a LinkedIn post before the announcement of his departure, said: "After a really stressful first half of 2022 many of us are looking forward to a well-deserved summer break."

A native of southern Germany's Bavaria, Diess joined Volkswagen from BMW in July 2015, just months before news broke that the carmaker had cheated emissions tests in the United States.

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