Volkswagen and EV start-up Rivian have entered a joint venture to create next-generation software-defined vehicle (SDV) platforms to be used in both companies’ future EVs.
Under the agreement, Volkswagen will initially invest $1bn in the electric truck and SUV maker, with another $4bn in planned additional investment by 2026. Rivian is expected to license existing intellectual property rights to the joint venture, giving Volkswagen “immediate access” to Rivian’s EV software for use in its own cars.
“This partnership brings Rivian’s software and zonal electronics platform to a broader market through Volkswagen Group’s global reach and scale, while providing an expected $5B of capital to Rivian.” Rivian CEO Robert Scaringe stated.
Volkswagen’s first investment in Rivian will be $1 billion. This investment will be in the form of a convertible note that will turn into a direct shareholding in Rivian, subject to necessary regulatory approvals, not earlier than December 1, 2024.
The size of the shareholding will be determined by Rivian’s average share prices at the time of the agreement and the conversion date.
Besides the direct investment, Volkswagen and Rivian plan to form a joint venture to develop next-generation electric vehicle architecture. Both companies will equally control the joint venture, each holding a 50% stake.
Besides the direct investment, Volkswagen and Rivian plan to form a joint venture to develop next-generation electric vehicle architecture. Both companies will equally control the joint venture, each holding a 50% stake.
If successful, Volkswagen will gain immediate access to Rivian’s current EV architecture technology for use in its own EVs. However, the joint venture’s establishment depends on several factors, like technical feasibility reviews, further negotiations, regulatory approvals, and achieving certain milestones.
A final decision on the joint venture’s establishment is still pending.
If the joint venture is successfully established, Volkswagen plans to invest an additional $4 billion, either in Rivian shares or the joint venture.
Volkswagen would also provide a payment of $1 billion upon the joint venture’s foundation in 2024, followed by a loan of $1 billion in 2026. If the joint venture is successfully implemented and further milestones are achieved, Volkswagen’s total investment in Rivian and the joint venture could amount to $5 billion by 2026.
This could result in a payout of $2 billion in the fiscal year 2024.
The proposed transaction could lead to an unexpected cash outflow of up to 2 billion EUR in the current fiscal year. As a result, Volkswagen is revising its financial forecast for the fiscal year 2024.
Volkswagen obviously sees value in this partnership in enabling the car maker to accelerate its plans to develop software-defined vehicles (SDV).
Oliver Blume, CEO of Volkswagen Group, said:
“The partnership fits seamlessly with our existing software strategy, products and partnerships. We are strengthening our technology profile and our competitiveness.”
