VW and Rivian have simply introduced that the 2 firms will kind a three way partnership, bringing Rivian’s software program experience to VW’s merchandise and offering an preliminary $1 billion, and probably 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 onerous 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 fee. The financials get a little bit bit higher every quarter, however there’s nonetheless plenty of work to be carried out.
Not too long ago, Rivian introduced that it will delay constructing its plant in Georgia to be able to save over $2 billion within the brief time period, serving to cut back strain on its near-term financials.
Now, right this moment, the corporate has had one other strain valve launched, as VW and Rivian have introduced they’ll kind a three way partnership to deliver Rivian’s software program to VW’s EVs, with VW providing an preliminary $1 billion in capital and probably as much as $5 billion by 2026.
“Our clients 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 quicker and at decrease value. We’re additionally performing in the most effective curiosity of our sturdy manufacturers, which can encourage with their iconic merchandise. The partnership matches seamlessly with our current 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 problem lately. VW’s earlier CEO, Herbert Diess, stepped down in 2022, and it’s thought that software program points had been the primary cause for his departure. In 2023, VW employed a former Rivian exec to assist with software program. It will need to have preferred what it bought, as the businesses are deepening their relationship now.
The partnership begins with VW providing a $1 billion convertible word 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.” This can give VW quick entry to Rivian’s electronics structure, which has been seen as one of many main strengths of the corporate.
“We’re very excited to be partnering with Volkswagen Group. For the reason that earliest days of Rivian, we’ve been targeted on creating 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 a fair 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 products, and this partnership is fantastically aligned with that mission.”
RJ Scaringe, Founder and CEO of Rivian
After the institution of this three way partnership, VW says it can make investments a further $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 right this moment’s buying and selling session after an analyst improve. Rivian will maintain an investor name at 3pm Pacific, 6pm japanese right here, and you may learn its investor letter right here.
Electrek’s Take
That is nice information for Rivian, and nice information for VW as nicely.
Nonetheless, Rivian has had quite a few previous partnerships that didn’t end up.
Rivian had beforehand partnered with Ford to construct Ford/Lincoln EVs and in addition 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 lately ran out, and now Rivian is on the lookout for extra purchasers.
On this case, although, I can see a direct cause for Voltswagen to want Rivian’s assist. Whereas their software program is quite a bit higher now than it was once, software program has been the achilles heel of conventional auto firms basically, and VW particularly. And with VW’s yearly income ($335 billion in 2023), they’ll spare a little bit change to repair certainly one of their main issues.
One different fascinating word: VW lately 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.