What's behind VW's $5 billion EV software bet on Rivian? - Autoblog (2024)

Rivian has expertise in areas where Volkswagen has faltered; VW, in turn, has money

BERLIN/FRANKFURT — Volkswagen, Europe's biggest carmaker, plans to spend as much as $5 billion on an electric vehicle (EV) software partnership with U.S.-based Rivian. Here are some of the key issues around the deal:

Why is VW doing this?

The tie-up is the latest in a string of deals by Volkswagen Chief Executive Oliver Blume, who took over in September 2022 after the ousting of Herbert Diess.

Shifting from combustion engine to electric cars requires expertise in areas where historically Volkswagen has little experience, from charging to batteries to software.

Diess set up software unit Cariad in 2020, hoping to develop a tech culture to rival Tesla's. It hasn't worked, with delays and losses plaguing the unit, a failure analysts have blamed partly on the group's sprawling management and slow decision-making.

Blume is looking outwards for a fix, doing deals with Xpeng in China and now Rivian in the United States to tap software expertise from EV-only startups that have developed the technology from a clean slate.

What do the partners bring to the table?

Volkswagen brings scale — and money. The investment it's putting up allows Rivian to develop more models and cut operating costs by leveraging volume.

Rivian brings its intellectual property on software, which will go into both Rivian cars like the R2 and, later on, Volkswagen Group cars from brands including Audi and Porsche — and notably, to the revived Scout brand, a vehicle not entirely unlike Rivian's.

The first cars to have the full Rivian stack — software, central computer and wiring — are to hit the road from 2028. But it might be possible to incorporate parts of the technology into earlier models. Rivian has already tested components from Audi to see how they can be combined with its technology.

What's the deal's structure?

Broadly speaking, the deal has two elements.

One is a planned 50:50 joint venture (JV) between Volkswagen and Rivian to develop state-of-the-art EV software. Volkswagen will invest up to $2 billion into the JV, half at the end of 2024 and the rest at the end of 2026. The investments will be made via direct equity and loan agreements.

The other element is Volkswagen directly investing up to $3 billion in Rivian, to be spread evenly over 2024-2026. While the first tranche will be via a mandatory convertible note in 2024, the other two are tied to undisclosed financial and technological milestones in subsequent years.

Based on Rivian's current market value, a $3 billion investment would get Volkswagen a 25% stake in the U.S. company, moving it ahead of current top shareholder Amazon.

Is this the end of Cariad?

Possibly, at least in its current form. Asked about Cariad, Blume said it had a "big role" for Volkswagen, calling the Rivian deal a "supplement" to boost the existing software strategy. And Cariad boss Peter Bosch said the partnership would speed up Cariad's work and lower costs.

But responsibility for the so-called "2.0 architecture" of the "software-defined vehicle" — a major software overhaul to unify operating systems across the Volkswagen group — now sits in the JV.

That leaves a lot less on the unit's plate, raising questions about how long it will continue as a standalone entity.

Is this a de-risking move by VW?

In part, yes. Volkswagen has done a similar deal with Xpeng in China, as part of its strategy to make its business there self-sustainable as global trade tensions rise.

Volkswagen said the Rivian software could technically be rolled out anywhere in the world, but nothing's decided yet.

In addition, the deal strengthens Volkswagen's ties with the United States, where the carmaker is aiming to double market share by 2030 as a potential counterweight to China, its biggest single market.

Are investors happy?

Not yet. Volkswagen's shares fell following the announcement, with analysts noting the high investment that has led the company to cut its net cash flow guidance for its automotive division to 2.5-4.5 billion euros ($2.7-$4.8 billion) from 4.5-6.5 billion.

Rivian stock, however, reacted positively, up more than 40% in the past five days.

Some analysts have also warned it could be hard to integrate Rivian's fast-paced startup culture with Volkswagen's multi-brand structure, which is considered slower and more rigid. Others, including brokerage Stifel, say the group should sell assets to simplify rather than buy them, citing the group's majority holding in truck division Traton.

What's behind VW's $5 billion EV software bet on Rivian? - Autoblog (2024)

FAQs

What is Rivian's software secret that Volkswagen so covets? ›

Volkswagen reckons that the real pearl in the grit of Rivian's uneconomical set-up is the company's grasp on software and modern electrical architectures. Of its $5bn planned investment, $2bn will go into creating a joint-venture company to create next-generation software-defined vehicle (SDV) architectures.

Why did VW buy Rivian? ›

As for VW, the deal gives Europe's leading automaker access to Rivian's tech know-how, which is important because VW reportedly has struggled with software issues in some of its vehicles, including its electric ID.

Who bought Rivian? ›

NASDAQ: RIVN

Volkswagen's big investment buys Rivian a lot more time to scale up its business. Rivian Automotive (RIVN -4.00%) has been a tough stock to own since its initial public offering (IPO). The electric vehicle (EV) maker went public at $78 per share on Nov.

How much did VW invest in EV? ›

Volkswagen Group has agreed to invest $5 billion in EV startup Rivian in a deal that also involves the creation of a joint venture allowing VW to use Rivian's technology to accelerate its own EVs.

What is VW cheat device? ›

The scandal broke in September 2015 when the US Environmental Protection Agency (EPA) discovered that Volkswagen had installed software in its diesel cars to cheat emissions tests. The software could detect when the vehicle was being tested and change the car's performance to pass the test.

Why did Ford pull out of Rivian? ›

As we moved through the development cycle, we determined that it would be better to pivot from the Rivian skateboard platform and focus our development efforts. Despite a spokesperson claiming Ford and Rivian will continue to be great partners, the two agreed it would be better to focus on their own projects.

Why did Tesla sue Rivian? ›

Tesla filed its lawsuit against Rivian, Tesla's competitor in the EV industry, back in July of 2020. Telsa alleged that Rivian recruited and subsequently employed Tesla employees. According to Tesla, Rivian then instructed those employees to divulge Tesla's proprietary trade secrets.

Is Ford buying Rivian? ›

Ford announced the company would retain a 12 percent stake in Rivian, which reached a value of more than $10 billion after the IPO. Ford sold around 90 percent of its stake in Rivian for $3 billion by the end of 2022, an increase from its $1.2 billion investment.

Is Rivian owned by China? ›

The Rivian R1T is a battery electric mid-size light duty luxury pickup truck produced by the American company Rivian. The first production R1T was manufactured in Illinois on September 28th 2021, and was delivered to a customer.

What is the Rivian scandal? ›

July 6 (Reuters) - A federal judge said Rivian Automotive (RIVN. O) , opens new tab must face a lawsuit claiming it defrauded shareholders during and after its blockbuster 2021 initial public offering by concealing that had underpriced its electric vehicles, leading to unpopular price hikes.

Who is the largest shareholder of Rivian? ›

The company's largest shareholder is Amazon.com, Inc., with ownership of 16%. Abdul Latif Jameel IPR Company Limited is the second largest shareholder owning 11% of common stock, and The Vanguard Group, Inc. holds about 7.0% of the company stock.

What software does Volkswagen use? ›

CARIAD – Automotive Software for Volkswagen.

What is the VW app to lock the car? ›

Control your car when you're next to it or miles away. Remote start5 the engine (if equipped)⁠, lock and unlock the doors,6⁠ honk the horn, flash the lights, and more—right from the myVW app.

What is Volkswagen Way to Zero campaign? ›

In order to reduce absolute CO₂ emissions in production by 30 percent, Volkswagen plans to gradually increase the proportion of renewable energy in externally sourced electricity for production to 100 percent renewable by 2030 – first EU-wide by 2023 (ŠKO-ENERGO by 2030 at the latest), then worldwide by 2030.

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