VW will make investments as much as $5B into Rivian to type three way partnership for next-gen EVs

VW and Rivian have simply introduced that the 2 firms will type a three way partnership, bringing Rivian’s software program experience to VW’s merchandise and offering an preliminary $1 billion, and doubtlessly as much as an eventual $5 billion, in capital for Rivian to get by means of its push to ship its upcoming R2 car.

Rivian is presently working arduous to get prices down in its quest for profitability. Whereas the corporate has massive money reserves, it’s operating by means of them at comparatively fast charge. The financials get a little bit bit higher every quarter, however there may be nonetheless lots of work to be achieved.

Lately, Rivian introduced that it will delay constructing its plant in Georgia with a purpose to save over $2 billion within the brief time period, serving to cut back stress on its near-term financials.

Now, immediately, the corporate has had one other stress valve launched, as VW and Rivian have introduced they are going to type a three way partnership to deliver Rivian’s software program to VW’s EVs, with VW providing an preliminary $1 billion in capital and doubtlessly as much as $5 billion by 2026.

“Our prospects profit from the focused partnership with Rivian to create a number one know-how structure. By way of our cooperation, we are going to deliver the most effective options to our autos sooner and at decrease price. We’re additionally performing in the most effective curiosity of our robust manufacturers, which can encourage with their iconic merchandise. The partnership matches seamlessly with our present software program technique, our merchandise, and partnerships. We’re strengthening our know-how profile and our competitiveness.”

Oliver Blume, CEO of Volkswagen Group

The partnership is efficacious for VW as nicely, as software program has been its largest subject not too long ago. VW’s earlier CEO, Herbert Diess, stepped down in 2022, and it’s thought that software program points have been the principle motive for his departure. In 2023, VW employed a former Rivian exec to assist with software program. It will need to have preferred what it obtained, as the businesses are deepening their relationship now.

The partnership begins with VW providing a $1 billion convertible be aware to Rivian, which can convert into an fairness holding across the finish of this 12 months.

As well as, the 2 firms will set up a 50/50 three way partnership round “subsequent era electrical/digital structure.” It will give VW fast entry to Rivian’s software program structure, which has been seen as one of many main strengths of the corporate.

“We’re very excited to be partnering with Volkswagen Group. Because the earliest days of Rivian, we now have been targeted on growing extremely differentiated know-how, and it’s thrilling that one of many world’s largest and most revered automotive firms has acknowledged this. Not solely is that this partnership anticipated to deliver our software program and related zonal structure to an excellent broader market by means of Volkswagen Group’s world attain, however this partnership additionally is anticipated to assist safe our capital wants for substantial development. Rivian was created to assist the world to transition away from fossil fuels by means of compelling services, and this partnership is superbly aligned with that mission.”

RJ Scaringe, Founder and CEO of Rivian

After the institution of this three way partnership, VW says it is going to make investments an extra $4 billion into Rivian, in $1 billion tranches in 2025 and 2026, contingent on Rivian assembly “sure milestones.”

After the announcement, RIVN inventory is buying and selling up greater than 40% in after hours buying and selling. It had already risen 8% throughout immediately’s buying and selling session after an analyst improve. Rivian will maintain an investor name at 3pm Pacific, 6pm japanese right here.

Electrek’s Take

That is nice information for Rivian, and nice information for VW as nicely.

Nonetheless, Rivian has had various previous partnerships that didn’t prove.

Rivian had beforehand partnered with Ford to construct Ford/Lincoln EVs and likewise with Mercedes to construct electrical vans. Each of these fell by means of, with the Mercedes deal together with a three way partnership and the Ford deal together with an enormous funding which Ford later trimmed.

Rivian has additionally partnered with Amazon to ship 100,000 supply vans. That partnership goes nicely with over 10,000 autos delivered, however the exclusivity portion of the contract not too long ago ran out, and now Rivian is in search of extra purchasers.

On this case, although, I can see a direct motive for Voltswagen to want Rivian’s assist. Whereas their software program is rather a lot higher now than it was, software program has been the achilles heel of conventional auto firms normally, and VW particularly. And with VW’s yearly income ($335 billion in 2023), they will spare a little bit change to repair one in every of their main issues.

One different fascinating be aware: VW not too long ago spun off its traditional Scout model right into a Rivian-like journey EV. That was seen as an try and compete in a market that Rivian is presently the most effective providing in. We surprise if this partnership will embody utilizing Rivian’s experience for the Scout? Keep tuned.