Volkswagen Group announced on Tuesday a significant investment of $1 billion into EV startup Rivian, part of a larger software development agreement that could potentially reach $5 billion.
This move marks a major boost for Rivian as it strives to advance its mass-market R2 SUV. Following the announcement, Rivian’s stock surged over 36% in after-hours trading.
For Volkswagen, this partnership offers a strategic avenue to bolster its software capabilities amid the rapid shift towards electric vehicles. The collaboration involves the creation of a joint venture with equal partnership, overseen by co-CEOs reporting to both Rivian and Volkswagen Group. Rivian will share its expertise in electrical architecture with VW and grant intellectual property rights to the joint venture.
Through this agreement, Volkswagen gains access to Rivian’s established electrical architecture and software platform, extending potential integration across its subsidiaries, including prestigious brands like Porsche and Audi, and its own EV initiative, Scout Motors.
The joint venture may also explore selling its technology to other firms in the future, although immediate focus remains on enhancing products within Rivian and Volkswagen Group’s portfolios.
Initially, Volkswagen will invest $1 billion in Rivian through an unsecured convertible note, set to convert into Rivian’s common stock upon regulatory approvals expected in the fourth quarter of this year. Additional investments include $1 billion annually in Rivian’s common stock through 2026, totaling $2 billion, and $2 billion directed towards the joint venture, split between an initial investment and a loan by 2026.
The collaboration’s origins trace back to discussions initiated when Rivian’s founder and CEO RJ Scaringe met with Volkswagen Group CEO Oliver Blume at Porsche’s Experience Center in Atlanta, Georgia, coinciding with Rivian’s plans to establish a factory in the state.
Both leaders emphasized their shared enthusiasm for automotive innovation and the potential synergies arising from their partnership. Volkswagen, recognizing Rivian’s agility and advanced software capabilities, views the collaboration as pivotal in enhancing its software-defined vehicle strategies, crucial for future revenue streams and competitive edge in the evolving automotive landscape.
This announcement follows Rivian’s recent launch of its next-generation R1T pickup truck and R1S SUV, showcasing upgraded technologies such as new electrical architecture and a streamlined software stack enabling wireless updates and improved vehicle performance.
While Rivian and Tesla embrace zonal architecture for software-defined vehicles, Volkswagen’s own software development efforts under Cariad have faced challenges, including delays and restructuring efforts aimed at refining its software architecture for future vehicle models.
The partnership with Rivian represents a strategic alignment aimed at accelerating software innovation across Volkswagen Group’s brands, aiming to deliver enhanced user experiences and meet evolving consumer demands in the electric vehicle sector.
