Volkswagen wants to develop its car software with the US electric car manufacturer Rivian and invest up to five billion dollars in the process. VW’s software subsidiary has repeatedly had problems.
Volkswagen is getting help from Tesla challenger Rivian for the next generation of car software. Europe’s largest car manufacturer wants to spend up to five billion dollars and develop technology for future vehicles together with the US electric car manufacturer. “The partnership is intended to accelerate software development at the Volkswagen Group and Rivian,” both companies said in a statement.
Wolfsburg wants to use US software
The Wolfsburg-based carmaker and Rivian want to set up a joint venture that will be owned equally by both companies. The cooperation includes 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. Rivian boss RJ Scaringe emphasized in a conference call that other areas such as batteries or drive technology are not part of the partnership.
VW could save a lot of money with the collaboration compared to developing the technology on its own. Until now, the car giant had bundled the area in its subsidiary Cariad, which has repeatedly struggled with problems. Because important software was not ready on time, the subsidiaries Audi and Porsche even had to postpone the launch of new models. According to “Handelsblatt”, model launches at Audi have been behind schedule for two years.
“Through our collaboration, we will bring the best solutions into our vehicles faster and at lower cost,” said Volkswagen CEO Oliver Blume. This will strengthen the company’s technology profile and competitiveness. Rivian, founded in 2009, is worth around eleven billion dollars on the Nasdaq technology exchange, but is making billions in losses with its electric pickups and SUVs. The share price shot up 42 percent after the market closed – that’s around four billion dollars.
Shorter route for Data transfer
In order to be able to offer new functions, manufacturers have been installing more and more control units and longer cable harnesses in their models 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”.
From the beginning, Rivian developed its own architecture in which the car electronics are divided into several zones with their own computers. In the first generation of the Rivian platform, 17 of these control units were still needed, said Scaringe. Now, for the second generation, the number has been reduced to seven. The company has recognized in recent years 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, says Pedro Pacheco, an automotive analyst at the market research firm Garter. This makes the company valuable for VW. When you consider how much money Volkswagen has already invested in developing its own platform, the billions for Rivian are “a real bargain” for the German company. In addition, the deal sends a signal that things that were once developed in-house can now come from another manufacturer.
The billions are to flow to Rivian gradually. In a first step, VW is subscribing to a convertible bond for one billion dollars, which is to be exchanged for Rivian shares in December at the earliest. In 2025 and 2026, Volkswagen plans to invest another billion dollars in Rivian shares. Volkswagen is spending up to two billion dollars on the joint venture itself, part of which will be due for the licensing of the Rivian software when it is founded, which is planned for the end of 2024.
Ultimately, both parties could benefit from the partnership: Rivian needs fresh money to finance the development of the cheaper and smaller R2 off-road vehicle, which is due to be launched in 2026. According to “Handelsblatt”, the company is looking for new partners in view of the losses. The retail giant Amazon, with whom Rivian works closely, does not want to inject fresh money. Rivian recently reduced production in order to save money. In the last quarter, the company delivered almost 13,600 electric cars and made a turnover of 1.2 billion dollars and a loss of 1.45 billion dollars.