VW throws US electric pickup maker Rivian $5 billion lifeline (Update)

Europe’s biggest carmaker, Volkswagen, is investing one billion dollars in American electric van and pickup specialist Rivian and promising another $4 billion in the coming years. The German Federal Cartel Office has also given the deal the green light.

For loss-making Rivian, losing up to $39,000 per car it produced, it’s a lifeline. For VW, it is a way to integrate Rivian’s software and next-generation electrical/electronic architecture for further joint development.

Rivian lost 1.45 billion dollars in the first quarter of this year. They hope to sell 57,000 of its electric pickups this year. In March, it had to suspend its plans to build a new $5 billion factory in Stanton Springs, Georgia, to save on cash.

In April, Rivian had to cut about 1% of its workforce—the second round of job cuts this year after a 10% reduction in February—as it reduced costs amid a broader slowdown in EV demand.

New mid-size platform

However, it also unveiled a new mid-size platform for the new R2 in March, its first next-generation model after the R1S and R1T. An even smaller model, the R3, will be available on the platform. Thus, both models are based on a new platform and come with a choice of one, two, or three electric motors.

Volkswagen now says it intends to establish a 50/50 joint venture with Rivian to create next-generation electrical/electronic architecture (so-called E/E) for electric vehicles.

Reviewing technical feasibility

It’s not final yet, as the actual establishment of the joint venture depends on “a series of different parameters, in particular, the final results of the further review of the technical feasibility of the integration of the E/E-architecture in Volkswagen vehicles, the further negotiations between the parties, as well as regulatory approvals.”

Volkswagen bets its entire future on electric vehicles after being ravaged by the Dieselgate scandal. Still, it suffered in creating its own software division, Cariad, to develop the new architecture for its EVs for various brands.

For instance, the market launch of the technically similar electric models Audi Q6 e-tron and Porsche Macan had been postponed several times due to delays in software development. Rivian’s successful hardware design and integrated technology platform will now serve as the foundation for future SDV development for both companies. The goal is faster development at a lower cost.

Faster and at a lower cost

Oliver Blume, CEO of Volkswagen Group, said: “Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. Through our cooperation, we will bring the best solutions to our vehicles faster and at a lower cost”

For RJ Scaringe, Founder and CEO of Rivian, the help of the world’s second-biggest carmaker is very welcome. “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.”

“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.”

Building vehicles separately

However, the press release says each company will continue to operate its respective vehicle businesses separately. Volkswagen itself is working on an electric pickup through its revival of an American icon: the International Harvest Scout, a Jeep and Ford Bronco competitor built from 1960 to 1980.

Scout Motors, Volkswagen’s rugged American EV brand, broke ground in February 2024 on its brand-new production facility in South Carolina. Production of the off-road capable pickup truck and SUV is targeted to begin by the end of 2026, with a market launch soon after. But the models will already be revealed this summer.

Deal approved

Meanwhile, the German Federal Cartel Office (Bundeskartellamt) has cleared the way for this software joint venture between Volkswagen and Rivian, announced around a month ago, under merger control law. The green light was also given for VW’s minority stake in Rivian.

The transaction was cleared under merger control as it was “not expected to significantly impede effective competition,” the German Federal Cartel Office announced. That applies “regardless of whether the relevant market is considered to consist of the E/E architecture as a whole or of various sub-systems and sub-services.”

The authority continues: “There will still be a sufficient range of services available to car manufacturers to build E/E architectures.” Thus, a relevant impairment of the innovation competition for E/E architectures is unlikely.

No competition concerns

“At its core, the cooperation project is about how to best organize a large number of complex functions and components in cars and how they interact with each other,” says Andreas Mundt, President of the Bundeskartellamt.

“As cars become increasingly digital and connected, the question of the right system architecture is nothing less than a key competition parameter. When it comes to cooperation projects set up to develop new products and technologies in key cutting-edge sectors, particularly those involving large companies, we take a close look at competition in innovation. The project does not raise any concerns in this respect, nor does it raise any other serious competition concerns.”

The Federal Cartel Office’s approval in the third quarter fits well with VW’s announced timetable. As announced in June, the establishment of the joint venture is expected to be formally finalized in the fourth quarter of 2024.

By then, it will also be clear who will lead the joint venture: Each side will appoint a co-CEO. In the case of Rivian, this will also be the Chief Technology Officer (CTO), while in the case of Volkswagen, the Co-CEO will also be in charge of operations (COO position). From the Rivian side, there’s a big chance the co-CEO might be Rivian CEO Robert Scaringe himself.