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 probably as much as an eventual $5 billion, in capital for Rivian to get by its push to ship its upcoming R2 car.
Rivian is at the moment working arduous to get prices down in its quest for profitability. Whereas the corporate has massive money reserves, it’s working by them at comparatively fast price. The financials get slightly bit higher every quarter, however there may be nonetheless a number of work to be accomplished.
Not too long ago, Rivian introduced that it might delay constructing its plant in Georgia in an effort to save over $2 billion within the brief time period, serving to cut back stress on its near-term financials.
Now, at this time, 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 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. Via our cooperation, we are going to deliver one of the best options to our automobiles quicker and at decrease value. We’re additionally performing in one of the best curiosity of our sturdy manufacturers, which can encourage with their iconic merchandise. The partnership suits 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 effective for VW as nicely, as software program has been its greatest situation 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 cause for his departure. In 2023, VW employed a former Rivian exec to assist with software program. It will need to have favored what it obtained, as the businesses are deepening their relationship now.
The partnership begins with VW providing a $1 billion convertible observe to Rivian, which can convert into an fairness holding across the finish of this yr.
As well as, the 2 firms will set up a 50/50 three way partnership round “subsequent technology electrical/digital structure.” It will give VW instant 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. Because the earliest days of Rivian, now we have 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 Volkswagen Group’s international attain, however this partnership additionally is anticipated to assist safe our capital wants for substantial progress. Rivian was created to assist the world to transition away from fossil fuels by compelling services and products, 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 should 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 at this time’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 numerous previous partnerships that didn’t prove.
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, 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 automobiles delivered, however the exclusivity portion of the contract not too long ago 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 wish Rivian’s assist. Whereas their software program is quite a bit higher now than it was, software program has been the achilles heel of conventional auto firms typically, and VW particularly. And with VW’s yearly income ($335 billion in 2023), they will spare slightly change to repair certainly one of their main issues.
One different attention-grabbing observe: VW not too long ago spun off its basic Scout model right into a Rivian-like journey EV. That was seen as an try and compete in a market that Rivian is at the moment one of the best providing in. We surprise if this partnership will embody utilizing Rivian’s experience for the Scout? Keep tuned.
