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    Innovation Village | Technology, Product Reviews, Business
    You are at:Home»Business»Volkswagen commits up to $5 billion in Rivian for strategic software partnership

    Volkswagen commits up to $5 billion in Rivian for strategic software partnership

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    By Tapiwa Matthew Mutisi on June 26, 2024 Business, Electric Cars, Funding, Investments, News, Software Development, Startups, Transportation

    Volkswagen Group has announced a strategic investment of $1 billion into the electric vehicle startup Rivian, as part of a comprehensive software development agreement that has the potential to escalate up to $5 billion. This financial injection is a significant boost for Rivian, particularly as the company navigates the challenging road ahead in bringing its mainstream R2 SUV to market.

    Following the news, Rivian’s stock experienced a dramatic surge, leaping over 49% in after-hours trading. The investment also represents a pivotal move for Volkswagen, providing the automotive giant with an alternative avenue to enhance its software capabilities—a domain where it has faced considerable challenges amidst the industry-wide shift to electric vehicles.

    The collaboration between Volkswagen and Rivian will involve the formation of a joint venture dedicated to the development and expansion of technological solutions. This venture will operate as an equal partnership, with co-CEOs at the helm, accountable to both Rivian and Volkswagen Group. Rivian is set to contribute its expertise in electrical architecture to the partnership and is expected to grant the joint venture licenses to its existing intellectual property.

    Through this partnership, Volkswagen will gain access to Rivian’s advanced electrical architecture and software platforms. The deal encompasses all subsidiaries of the Volkswagen Group, potentially integrating Rivian’s technology into iconic brands such as Porsche, Audi, and Volkswagen’s own emerging EV brand, Scout Motors.

    There is also the prospect that the joint venture may eventually offer its technological advancements to other companies. However, Rivian’s founder and CEO, RJ Scaringe, emphasized the immediate focus on developing products within both Rivian’s and Volkswagen Group’s portfolios during a conference call, expressing enthusiasm for the future.

    The initial investment from Volkswagen will take the form of an unsecured convertible note, which will be converted into common stock in Rivian upon obtaining the necessary regulatory approvals, anticipated in the fourth quarter of the current year. Volkswagen plans to follow up with an additional purchase of $1 billion in Rivian common stock across 2025 and 2026. The joint venture will also benefit from the remaining $2 billion, which will be allocated as an initial investment and a subsequent loan in 2026.

    RJ Scaringe, the CEO of Rivian, has kept the timeline of discussions with Volkswagen Group under wraps, but he did share that the initial talks of a potential collaboration began during a meeting with Volkswagen Group CEO Oliver Blume at Porsche’s Experience Center in Atlanta, Georgia. This location is particularly significant as it is in the same state where Rivian intends to construct a new factory.

    Scaringe, a self-proclaimed Porsche aficionado who has personally restored classic Porsche 356s and owned various vehicles from the Porsche/Volkswagen lineage, recognized a mutual passion for automobiles during his interaction with Blume. This shared enthusiasm quickly transitioned into a more substantive dialogue about the possibilities of a partnership.

    Blume reciprocated the sentiment during the conference call, highlighting the immediate rapport and aligned vision between the two. He emphasized the importance of interpersonal understanding in the automotive industry and praised Rivian for its agility and modern software expertise.

    The announcement of this collaboration comes on the heels of Rivian’s launch of the next-generation R1T pickup truck and R1S SUV. These upgraded models feature comprehensive revisions, including a new battery pack, suspension system, electrical architecture, interior seating, and sensor stack. Rivian’s innovative electrical architecture has significantly reduced the number of electronic control units (ECUs) from 17 to 7, allowing for a reduction of over 1.6 miles of wiring per vehicle, which translates to a weight saving of 44 pounds and faster vehicle assembly.

    The new zonal architecture is a cornerstone of Rivian’s internal innovation, enabling wireless software updates. It supports Rivian’s in-house developed software stack, which manages critical vehicle functions such as thermal dynamics, ADAS, safety systems, and the infotainment system.

    Both Rivian and Tesla have adopted a zonal architecture approach, which is considered foundational for what the industry refers to as software-defined vehicles. These vehicles not only enhance the driving experience but also present automakers with new revenue opportunities through in-car entertainment and services. In 2021, VW Group’s software unit Cariad projected that it could generate significant revenue by 2030 through subscriptions and other sales.

    Volkswagen has consistently aimed to integrate advanced, easily updatable software across its vehicle range. However, Cariad has encountered delays and leadership changes. Last October, Volkswagen Group’s board sanctioned a restructuring of Cariad, which included workforce reductions and further postponed the launch of its software architecture 1.2 by 16 to 18 months.

    The software 1.2 platform, intended for the Porsche Macan EV and the Audi Q6 E-Tron, was initially set for completion in 2022 but has seen multiple delays. Volkswagen’s current vehicles are equipped with the software 1.1 version, and Cariad is also developing a 2.0 version, an operating system intended for all VW Group brands, originally targeted for a 2025 release.

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    Business Electric Vehicles EVs Funding Investments Partnerships Rivian Automotive Inc. software Software Development Startups Technology Transportation Volkswagen Group VW
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    Tapiwa Matthew Mutisi
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    Tapiwa Matthew Mutisi has been covering blockchain technology, intelligent technologies, cryptocurrency, cybersecurity, telecommunications technology, sustainability, autonomous vehicles, and other topics for Innovation Village since 2017. In the years since, he has published over 4,000 articles — a mix of breaking news, reviews, helpful how-tos, industry analysis, and more. | Open DM on Twitter @TapiwaMutisi

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