Two things are forcing them to make significant changes.
A few months ago, a pair of Tesla Model 3s were spotted being sent to Germany. The presumption is that they were purchased by a major German automaker for the sole purpose of reverse-engineering, a common industry practice. Sure enough, that appears to have been the case and the buyers turned out to be Porsche and Audi, both part of the VW Group.
According to Electrek, via the German language Manager Magazin, the two premium German brands are working together to develop the next generation EV platform, beyond the upcoming Taycan and e-tron GT. But first, they needed to see a Model 3's guts. Engineers soon realized they had a problem. The report stated that "The Porsche and Audi engineers have to change the Premium Platform Electric (PPE platform) because Tesla's Model 3 has gotten better than they thought."
That platform was actually approved for production two years ago with the goal of being ready to go for 2020 or 2021. The Model 3's platform was deemed not only technologically superior but also cheaper to produce. The report further claims the first version of Porsche and Audi's platform was running about 3,000 euros too expensive to build. Porsche, however, claims it can absorb the cost but Audi cannot.
The only solution is to find ways to lower costs while still achieving a technological edge over their US competitor. Turns out the battery cell is the most significant cost factor and, sure enough, Tesla just so happens to be the current industry leader in battery cells.
At the moment, the Germans can't compete with that and it'll take additional time to do so. More than likely, Porsche and Audi will delay the PPE platform to improve cost and make it more competitive. There's really no choice because, also according to the report, the Audi e-tron program isn't doing so well. "The e-tron as the first electric Audi is not only late. It does not reach some target values and has become far too expensive with more than two billion euros in development costs. The approximately 600,000 cars sold for the break-even are now regarded as an illusion."
For example, the e-tron SUV was supposed to be delivered to anxious customers last year, but various software issues have caused delays. While Tesla isn't perfect, it still remains the EV technology benchmark for the world's most exclusive automakers.