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This past summer, Rivian and Volkswagen formed a joint venture to develop the next generation of electric and electronic controls for electric vehicles. That architecture determines how the various electrical and electronic functions of an EV are designed and embedded in vehicles and how they interact. Each company owns 50% of the new enterprise, but Volkswagen ponied up $5 billion to fund the project. Rivian will contribute its expertise at making electric vehicles that actually operate properly. Volkswagen already has a division that is supposed to do that called CARIAD, but if it is shoveling money to Rivian, it seems to be a safe assumption that CARIAD still cannot get its sums right after five years of trying.
Andreas Mundt, president of Germany’s Federal Cartel Office, which had to approve the arrangement, said “At its core the cooperation project is about the way in which a large number of complex functions and components are best organised in cars and how they interact with each other. 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.”
Volkswagen Ups The Ante
At a press event in Palo Alto, California, on November 13, 2024, Volkswagen Group CEO Oliver Blume said the first vehicles to use the new architecture are expected to arrive in 2027, starting with Volkswagen brand vehicles and then expanding to Audi, Scout, Porsche, and other brands within the Volkswagen Group, according to a report by Bloomberg. Blume made the announcement in Palo Alto because that is where the JV will have its headquarters. The software developed by it will be used by both parent companies and could be marketed to other automakers in the future. CATL this week also announced it will develop an electric car chassis for use by other companies.
Bloomberg says the deal offers an important financial shot in the arm for Rivian, which is operating at a loss due to a decreased in demand for electric vehicles in the US. The next administration is poised to take a sledgehammer to federal EV incentives, which could put further pressure on Rivian. In the last quarter, Rivian reported a $392 million loss against $874 million in revenue, despite delivering around 10,000 vehicles. Volkswagen in the same period, managed to deliver nearly 2.2 million vehicles for gross sales of €78.5 billion ($83.3 billion) and a €1.58 billion profit after taxes — a substantial decrease from last year. Blume has announced that Volkswagen may need to close up to three factories in Germany to offset lower sales.
As part of his remarks in California this week, Blume let it be known that Volkswagen has raised its investment in the new joint venture by an additional $800 million, signaling its commitment to its new US partner even as electric vehicle demand softens and the incoming Trump administration threatens to curtail supportive policies. The increase may ease concerns about Rivian’s cash flow problems.
The joint venture will be known as Rivian and VW Group Technology and will be led by co-chief executive officers Wassym Bensaid, Rivian’s chief software officer, and Carsten Helbing, chief technology officer at Volkswagen, About 1.000 employees drawn from both companies are expected to staff the joint venture. “This is an acceleration of our plans for the future,” Bensaid said in an interview at Rivian’s Palo Alto office, according to Bloomberg. At that press conference, a prototype was shown to a small group of reporters. It integrates Rivian’s software-based vehicle architecture into an unmarked VW test vehicle, which Bensaid said was outfitted by the JV’s engineers over a 12-week period.
Help For Rivian
The venture with Rivian may prove critical for Volkswagen as the manufacturer struggles despite massive investment. In the aftermath of the 2015 diesel scandal, Europe’s largest carmaker laid out what was arguably the industry’s most ambitious EV push under then-CEO Herbert Diess. But buggy software delayed key electric models, contributing to his ouster in 2022.
Helbing, who will also serve as chief operations officer of the venture, said the technology will be easily translatable to commercially available Volkswagen models. He added that accelerated decision making and development are a side benefit of the collaboration with a smaller and more nimble partner like Rivian. “For us, the impressive part was the speed and pace of implementation,” Helbing said in the interview. “The intention is to keep the pace.” Bensaid added that Rivian sees the venture as a way to boost cost savings by leveraging the economies of scale enjoyed by its larger partner, which he expects will improve Rivian’s own vehicle margins.
The new Scout brand also plans to use technology from the Rivian/Volkswagen joint venture, he added. That sparks an interesting question. Scout plans two body styles — a pickup truck and an SUV. Rivian currently manufactures a pickup truck and an SUV. The design sketches for Scout look a lot like Rivian’s products. Are the two going to cooperate on the software side and then compete against each other in the marketplace?
Labor Unrest At Volkswagen
“We view the deal as a less expensive way for Volkswagen to finance its software-defined vehicle architecture goals and for Rivian to receive funding to get to its R2 launch,” RBC Capital Markets analyst Tom Narayan told investors this week, Bloomberg reports. The question for Volkswagen is whether this increasingly pricey Rivian partnership will hurt its position at the bargaining table. After it reported its least profitable quarter in years a few weeks ago, management has elected to pursue increasingly drastic measures.
Labor leaders last month said they would resist proposals made by the company, including a 10% wage cut and closing up to three factories in Germany. A grace period in those tense negotiations runs out at the end of this month, with warning strikes expected for early December if no agreement is reached before then.
A question rocketing around the plush CleanTechnica employees lounge is, where does this leave the supposed link up with XPeng that Volkswagen announced earlier this year? That was supposed to also leverage another company’s technical prowess to get Volkswagen out of the digital hole it has dug for itself. We have to assume that a.) that was just for the China market or b.) it did not bear fruit and has been quietly dropped. Either way, it appears mighty Volkswagen doesn’t have the technology chops to build electric cars without outside help. Will it even survive at this rate until the end of this decade or will both companies drag each other down? Inquiring minds want to know.
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