Volkswagen Group Meets Rivian - Perfect Match in a Volatile EV Market
Saturday
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07
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2024
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The automotive industry is set to witness a groundbreaking collaboration as Volkswagen Group and Rivian announce their plans for a joint venture aimed at revolutionizing vehicle software technology. The partnership is anticipated to accelerate the development of software for Rivian and Volkswagen Group. It is expected to allow both companies to combine their complementary strengths and lower cost per vehicle by increasing scale and speeding up innovation globally. Rivian’s proven in-market zonal hardware design and integrated technology platform are expected to serve as the foundation for future SDV development in the JV that will be applied to both companies’ vehicles. Rivian plans to contribute its electrical architecture expertise and is expected to license existing intellectual property rights to the joint venture.

A Strategic Investment by Volkswagen Group

As part of this collaboration, Volkswagen Group is making a significant strategic investment in Rivian, underscoring its commitment to innovation and sustainability in the automotive sector. This investment will not only provide Rivian with additional capital to expand its operations but also foster a deeper technological integration between the two companies. Volkswagen Group plans to make up to $5 billion total investments and will initially invest $1bn in Rivian through an unsecured convertible note that will convert into Rivian’s common stock upon the receipt of regulatory approvals and December 1, 2024. Volkswagen Group is expected to invest further up to $4bn as part of the transaction. All transactions are obviously still subject to completion of definitive agreements, the conditions included in those agreements and the receipt of required regulatory approvals.

Focus Areas of the Joint Venture

The Volkswagen-Rivian joint venture will concentrate on several key areas:

  • Integrated Vehicle Software Platforms: Developing seamless and secure software platforms that integrate vehicle control systems, infotainment, and driver assistance technologies.
  • Over-the-Air (OTA) Updates: Enabling vehicles to receive continuous improvements and new features through OTA updates, enhancing the longevity and functionality of the cars.
  • Advanced Driver Assistance Systems (ADAS): Innovating ADAS technologies to improve safety and driving experience, paving the way for more autonomous driving capabilities.
  • User Experience (UX): Crafting intuitive and engaging user interfaces that provide a cohesive and enjoyable driving experience.
“Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost. We are also acting in the best interest of our strong brands, which will inspire with their iconic products. The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness."
Oliver Blume, CEO of Volkswagen Group.

The Impact of the planned Joint Venture on the Automotive Industry

This collaboration marks a significant milestone in the evolution of automotive technology. By pooling their resources and expertise, Volkswagen and Rivian are poised to accelerate the development and deployment of cutting-edge software solutions that will benefit consumers, enhance vehicle performance, and contribute to the global push for more sustainable transportation options. Some industry observers have a more trivial view on this transaction, stating that the fit for both parties can be simplified: Rivian needs the cash; VW needs the native EV tech.

And there is some truth in this simple observation: “The joint venture could help Volkswagen in speeding-up the SDV plans of the company towards a zonal architecture. Accelerating its software and its electric architectures will be essential for the success of VW Group in the near future,” says Prof. Stefan Bratzel, automotive expert and Director of Germany based Center of Automotive Management (CAM) in a comment. Volkswagen Group had concentrated its software activities in a subsidiary called Cariad; however, the venture has been troubled with management and efficiency issues for a long time.

For young American automotive manufacturer Rivian, the deal proposes a financial cushion and potentially, a production capacity and capability. Interesting to see, that the $5bn investment almost covers last year’s net loss at Rivian. The new partner from Germany and its investment will provide Rivian the funding necessary to develop its less expensive and smaller R2 SUVs that are set to roll out in early 2026 and its planned R3 crossovers, CEO RJ Scaringe stated in a press release. For sure, the partnership will enable Rivian to cut operating costs by leveraging volumes of supplies including chips and components, and in the mid-term a distribution partnership could be up for grabs.

Our take on this Joint Venture between Volkswagen Group and Rivian

There are two clear winners in this deal, Volkswagen (finally) getting access to EV technology and Rivian finding the stability needed in a currently volatile EV market. Some might argue that $5bn would have worked magic at VW software subsidiary Cariad, however, software development is not always the strength of a car manufacturer and most often requires a different kind of mentality and speed. These two factors have now paid off for Rivian and a joint future seems very logical from our point of view.

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Photos courtesy of Rivian.

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