Volkswagen is investing in Rivian. Why? For the software that Rivian uses in its cars. Both brands plan to create an equally controlled and owned venture that will lead to the two companies creating "next-generation electrical architecture and best-in-class software technology". This comes after Volkswagen tried to make a software unit Cariad in 2020, which got delayed and led to significant losses for the German brand. What is the deal all about? Find out below:
What Does Each Brand Contribute?
In the immediate term, Volkswagen brings money, around Rs 41,725 Crore ($5 billion). They also bring scale and hardware expertise. These funds will help Rivian develop better models and cut operation costs with the increasing volume.
As we said before, Rivian brings in the software that will be used in both Rivian cars and Volkswagen group cars from all their legacy brands, like Audi and Porsche.
The complete Rivian software models are expected to reach the market by 2028. They might even try to implement this software in the previous models.
Who Owns How Much?
The deal has two parts. The first is a 50:50 joint venture (JV) between Volkswagen and Rivian to develop EV software for the future. Volkswagen will invest Rs 16,700 Crores ($2 billion) in the JV. The money will come first at the end of 2024 and then at the end of 2026 through direct equity and loan agreements.
The second part is Volkswagen's investment in Rivian, which amounts to around Rs 25,000 Crore ($3 billion) and will be spread between 2024 and 2026. Volkswagen will become the highest shareholder in Rivian with this investment, which will give them about a 25% stake in the company by current market value.
What Did Company Bosses Say?
Oliver Blume, CEO of Volkswagen Group, said: "Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. He added, "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." He also claimed, "The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness."
RJ Scaringe, founder and CEO of Rivian, said, "We're very excited to be partnering with Volkswagen Group. Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it's exciting that one of the world's largest and most respected automotive companies has recognized this". He further said, "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. Rivian was created to help the world to transition away from fossil fuels through compelling products and services, and this partnership is beautifully aligned with that mission."
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