VW invests up to 5 billion euros in Tesla rival
The electric SUV R1S from Rivian
Source: picture alliance/abaca/TNS/ABACA
Volkswagen is planning a five billion euro partnership with the US electric car manufacturer Rivian. Problems at VW’s software company Cariad in particular have repeatedly set the Wolfsburg-based company back. The deal is intended to change that.
VVolkswagen is getting help with electric cars from Tesla challenger Rivian – and is investing billions in the process. Europe’s largest carmaker wants to spend up to five billion dollars and jointly develop technology for future vehicles. For Rivian, it is a very welcome cash injection: The company is still in the red and is currently struggling with declining interest in electric cars in the USA. Rivian’s recently weakened shares jumped by almost 50 percent in after-hours trading in the USA.
The cooperation is quite narrowly defined: software, control computers and network architecture. A key point: Volkswagen will switch to Rivian’s technology and software for new cars in the second half of the decade. The car giant could save a lot of money in this way compared to developing the technology on its own. Rivian boss RJ Scaringe emphasized in a conference call on Tuesday that other areas such as batteries or drive technology are not part of the partnership.
So that manufacturers can keep offering new functions, cars have been getting more and more control units and longer cable harnesses for years. With the advance of electric cars, competition for new vehicle architectures also began. The trends: less complexity and a focus on software. Tesla was a pioneer – a computer on wheels.
Rivian architecture should fix it
From the beginning, Rivian developed its own architecture in which the car’s electronics are divided into several zones with their own computers. In the first generation of the Rivian platform, 17 of these control units were needed, said Scaringe. Now, for the second generation, the number has been reduced to seven.
VW has been struggling with problems with its in-house software development for electric cars for years, which has already delayed model launches. Scaringe put his finger on the sore spot on Tuesday. In recent years, it has been recognized that established manufacturers have difficulties with their own software.
He believes the reason for this lies in how car manufacturers have done business for decades: a lot of technology was bought from various suppliers, “as a result you had a lot of small computers that were connected to very specific functions.” If you come from this world, you have a hard time developing an architecture based on the zone principle, in which a control unit takes over functions across several areas. Rivian arranged these ECUs (Electronic Control Units) throughout the vehicle to shorten the path for data transmission.
“A real bargain”
Rivian is one of the few manufacturers that have such a zone architecture in series production – and is therefore valuable for VW, commented Pedro Pacheco, automotive analyst at the market research firm Garter. Considering how much money Volkswagen has already invested in developing its own platform, the billions for Rivian are “a real bargain” for the German company. The deal also sends a signal that things that were once developed in-house can now come from another manufacturer. At the same time, Pacheco raised the question of what manufacturers do with their own car software teams when they buy so much.
Rivian and VW’s plan is to set up a joint venture in which development work will be carried out for both manufacturers. The billions will gradually flow to Rivian. First, VW will buy convertible bonds for one billion dollars. If the joint development laboratory is established, VW will pay another billion, buy shares in two tranches for one billion each in 2025 and 2026, and provide another billion as a loan.
Volkswagen has recently encountered increasing difficulties in its aggressive course towards electromobility. Demand is weak in Europe, and competition from low-cost domestic manufacturers in China is tough. In the USA, the company wants to gain significant market share with electric cars and has already announced major investments for this purpose.
Rivian delivered almost 13,600 electric cars last quarter, generating $1.2 billion in sales and a loss of $1.45 billion. The company is active in two vehicle categories that are popular in the USA: large SUVs and pickup trucks. Rivian also builds electric delivery vans for Amazon, which can now also be seen in Europe. The world’s largest online retailer is also an investor.
The mood among Tesla’s challengers, who had hoped for an ever faster pace of electric car sales, is subdued. In the USA in particular, many buyers are currently opting for hybrid models, and Tesla’s growth has also suddenly slowed. The company Fisker had to file for bankruptcy. Its SUV model Ocean was delayed and annoyed some buyers and testers with software problems.