Exactly this. In Germany, the median software developer is treated (and paid) pretty much the same as a blue collar worker, both by their company and by society at large.
From calling it "IT" to paying peanuts, no wonder no one smart and ambitious wants to get into CS here. All the smart kids seems to want to go into consulting and finance. So, of course Germany doesn't see the kind of outsized success in the Tech industry like the US or even the UK.
Volkswagen's (and in general other automaker's) software sucking is simply a fact downstream of that.
In a typical German corp software developers even in RnD are not seen as an asset but as a mixture of line workers and support staff.
The problem is: The world best assembly line worker will not boost your companies performance in a measurable way, but a better dev will make a heavy impact in his project.
Nice example:
A friend of mine worked in RnD in a German DAX corp. C-Level regularly had them fix bugs in other projects. Why? RnD is the only department that can adapt its planing fast enough to fit in stupid side tasks. As a result the best people left, were replaced and the average skill of the department regressed to the mean.