German legacy automaker Volkswagen Group announced Tuesday its plans to invest up to $5 billion in American startup Rivian. The joint press release further revealed that the two electric vehicle players mull establishing a new joint venture to develop “industry-leading” vehicle software technology.
VW to invest $5B in a potential JV with Rivian
According to the announcement, Volkswagen Group and Rivian plan to form a 50-50 joint venture to develop next-gen electrical architecture and “best-in-class” software technology.
In the short term, the partnership will allow the German Group to use Rivian’s existing E/E architecture (electrical/electronical architecture) and software platform for its products.
VW will invest an initial $1 billion in capital for Rivian, potentially increasing to $5 billion (contingent on Rivian meeting “certain milestones”). VW is still exploring whether a JV could be established, saying that it would invest another $4 billion if such a JV “would be established successfully.” The investment will aid Rivian in delivering its new R2 models.
By the second half of the decade, the partners will gradually launch electric vehicle models equipped with the technologies from the potential JV.
“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
VW, Rivian join forces for software development
The new joint venture will help accelerate the software development of Volkswagen Group and Rivian.
The two companies aim to tap into each other’s strengths and expertise to accelerate their global innovation and expand scale, potentially enabling them to cut costs per vehicle.
Rivian will leverage its in-market zonal hardware design and integrated technology platform to advance the joint venture’s future SDV innovations that will benefit both parties. It will also bring its electrical architecture expertise and license intellectual property rights to the joint venture.
“Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth.”
RJ Scaringe, Founder and CEO of Rivian
Mutual benefits
The partnership is undoubtedly great news not only for Rivian but also for Volkswagen.
Volkswagen Group’s investment will significantly aid Rivian in pushing through with the deliveries of its upcoming R2 vehicles.
On the other hand, the German Group can leverage Rivian’s innovative software to improve its new offerings. While VW’s software has become way better now than it used to be, this area has been one of the major challenges impeding traditional automakers in general.
Considering VW’s annual revenue ($335 billion in 2023), it will not hurt it if it allocates some money to address one of its major problems.
RIVN stock was trading up over 40% in after hours trading following the JV announcement with Volkswagen Group. After an analyst upgrade, it had already surged 8% during Tuesday’s trading session. Rivian is set to initiate an investor call at 3 pm Pacific, 6 pm eastern here.
