Volkswagen Group said Tuesday it will invest $1 billion in electric vehicle startup Rivian as part of a wide-ranging software development deal that could expand to as much as $5 billion.
It’s a boon for Rivian, which has a soft road ahead as it seeks to develop a mass-market R2 SUV. The company’s shares rose more than 36% in after-hours trading.
But it also gives Volkswagen another option to develop its own software pieces — something it has struggled with greatly during this mass shift to electric vehicles.
As part of the deal, the two companies will establish a joint venture to develop and grow this technology. The partnership will be 50/50 between the participating CEOs who will report to both Rivian and Volkswagen Group. Rivian will share its electrical engineering expertise with VW and is expected to license existing intellectual property to the joint venture.
This arrangement will give Volkswagen access to Rivian’s existing electrical architecture and software platform. All Volkswagen Group subsidiaries are included in the deal, which could bring Rivian’s DNA to iconic brands like Porsche, Audi and even the group’s electric car startup, Scout Motors.
It is possible that the joint venture will sell its technology to other companies in the future as well. “But we have a lot to do in the short term,” RJ Scaringe, founder and CEO of Rivian, said on a conference call. “We have a lot of products to work on, so we are completely focused on the prize on the products within the Rivian portfolio, within the Volkswagen Group portfolio, I would say [we] “I couldn’t be more excited about what’s to come.”
Initially, Volkswagen will invest $1 billion in Rivian via unsecured convertible notes that will convert into Rivian common stock once certain regulatory approvals are received. That’s expected to happen in the fourth quarter of this year. The German auto giant will then buy another $1 billion of Rivian common stock in each of 2025 and 2026. The remaining $2 billion will go to the joint venture, split between an initial investment and a loan in 2026.
Scaringe did not say exactly when the two companies began toying with the idea of collaborating. But he said the conversation started when he met Volkswagen Group CEO Oliver Blume at the Porsche Experience Center in Atlanta, Georgia — the same state where Rivian plans to build a factory.
“I grew up being a huge Porsche enthusiast. I’ve restored classic 356s, and have owned all sorts of interesting products from the Porsche/Volkswagen family, so there was an immediate realization that we had some common interests in cars.” But it soon led to a conversation Serious to say, how can we look at working together?”
Bloom echoed that sentiment on the call. “From the first moment, there was a very good feeling between us, the same mentality, the same interests. Our business is a people business, and when you understand each other, you will be successful,” he said, adding that Rivian “is very flexible and experienced in modern software.”
The news comes just weeks after Rivian began production of the next generation of its R1T pickup truck and R1S SUV, an upgrade that reworked the guts of its vehicles, changing everything from the battery pack and suspension to the electrical architecture, interior seats and sensors. pile. Rivian’s new electrical architecture and computing platform has reduced the number of electronic control units (ECUs) used to control the vehicle from 17 different ECUs in its first generation to seven. This new zone architecture allows Rivian to cut more than 1.6 miles of wire from each vehicle — saving 44 pounds of weight — and build its vehicles faster.
This new electrical architecture — or what Scaring describes as the new vehicle terrain — is seen internally as a key innovation at Rivian that allows the company to update software wirelessly. The new regional architecture supports the Rivian software suite, which is also developed and deployed internally. This software suite includes everything related to the real-time operating systems (RTOS) that manage the car, such as thermodynamics, advanced driver assistance systems and safety systems, as well as another layer related to the infotainment system.
Both Rivian and Tesla use a regional architecture, which many believe is the basis for what the industry calls software-defined vehicles. Software-defined vehicles also provide automakers with an opportunity to add revenue streams via in-vehicle entertainment and services. In 2021, the Volkswagen Group said Cariad could generate revenues of up to 1.2 trillion euros ($1.4 trillion) by 2030, through subscriptions and other sales.
Volkswagen has long stated its goal of offering advanced, easily upgradable software across its entire portfolio. But the company and its software unit Cariad have been plagued by delays and executive changes. Last October, the Volkswagen Group’s board of directors approved a restructuring of Cariad, a move that included laying off up to 2,000 employees and delaying the launch of Volkswagen’s software architecture 1.2 by 16 to 18 months.
Program 1.2. The platform, which was developed for the Porsche Macan EV and Audi Q6 E-Tron, was originally scheduled to be completed in 2022. Cariad has pushed back the release date several times. Today’s Volkswagen cars already have version 1.1 of the software installed. Cariad is also working on version 2.0, an operating system designed for all VW Group brands. The 2.0 architecture was initially scheduled to launch in 2025.