Volkswagen to invest up to $5 billion in Rivian over the next 2 years, companies will share software

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The Volkswagen Group will invest up to $5 billion in US EV maker Rivian in a complex deal under which the two companies will form an equally controlled joint venture to share EV architecture and software.

As reported by Reuters, Volkswagen will immediately invest $1 billion in Rivian through a convertible note, and also pledges to invest $2 billion more in Rivian stock—a billion each in 2025 and 2026—subject to the startup hitting certain milestones, and to provide a $1-billion loan in 2026.

Further details of the deal aren’t quite clear at this point, but this is how we understand it: Volkswagen will also invest $1 billion in the new JV, and Rivian will license its existing intellectual property to the JV. Rivian’s upcoming R2 will be the first vehicle to use software from the JV. EVs from Volkswagen brands, including Audi, Porsche, Lamborghini and Bentley, will follow.

The deal appears to play to each company’s strengths: Rivian (like most startups) needs cash, and Volkswagen (like most legacy automakers) is struggling with the software aspects of electrification.

The investment will provide Rivian funding it needs to launch its less expensive and smaller R2 SUV in 2026, and to develop its new R3 crossovers, CEO R.J. Scaringe told Reuters. He added that the partnership will enable Rivian to cut costs by taking advantage of Volkswagen’s economies of scale with chip and component suppliers.

Rivian has been slashing costs, redesigning its manufacturing process and starting to build some parts in-house, but it’s still burning through cash (Reuters reports that the company’s cash and short-term investments fell by about $1.5 billion in the first quarter to just under $8 billion).

“Any cash infusion like that is huge,” said Vitaly Golomb, Managing Partner at Mavka Capital, a Rivian investor, told Reuters. “Getting the support of Volkswagen Group certainly strengthens their story toward Europe and toward Asia eventually.”

VW’s software division, Cariad, has been struggling to integrate software from a range of suppliers (in contrast to the unified software architecture used by Tesla and other EV brands), and this has delayed the launch of important new EV models, Reuters tells us.

Volkswagen says the Rivian software will also be used by its off-road EV brand Scout, which is building a plant in South Carolina to assemble pickups and SUVs that could be seen as Rivian competitors.

Wall Street appears to like the plan—Rivian stock, which has lost around half its value so far this year, jumped in after-hours trading following the announcement.

Scaringe tweeted that he’s excited about “the formation of a joint venture between our two companies. This partnership brings Rivian’s software and zonal electronics platform to a broader market through Volkswagen Group’s global reach and scale, while providing an expected $5 billion of capital to Rivian as we bring R2 and our next generation of vehicles to market!”

Source: Reuters





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