In a groundbreaking move, Rivian Automotive (NASDAQ: RIVN) and Volkswagen Group (XETRA: VOW / VWO3) have formalized their plan to establish a mutually managed joint venture (JV) aimed at pioneering state-of-the-art electrical architecture and top-tier software technology.
This strategic alliance is set to expedite the advancement of software for Rivian and Volkswagen Group, allowing for the amalgamation of their complementary capabilities. This is anticipated to result in reduced vehicle costs through increased efficiency and accelerated innovation on a global scale. The expertise in zonal hardware design from Rivian, combined with its integrated technology platform, is poised to become the cornerstone for the joint venture’s future SDV development, which will be implemented across both companies’ vehicle ranges. Rivian is expected to leverage its know-how in electrical architecture and potentially license its existing intellectual property rights to the JV.
Both firms aim to introduce vehicles leveraging the technology developed through the joint venture in the latter part of this decade. In the near term, the partnership is projected to allow Volkswagen Group to integrate Rivian’s existing electrical architecture and software platform. The overarching goal of this collaboration is to expedite Volkswagen Group’s SDV initiatives and transition to a streamlined zonal architecture. Each company will continue to independently manage their respective vehicle operations.
Volkswagen Group’s CEO, Oliver Blume, commented: “The partnership with Rivian is poised to deliver a pioneering technological architecture that will benefit our customers. Through this collaboration, we anticipate quicker delivery of superior solutions to our vehicles at a reduced cost. Our focus is to enhance our iconic brands with the latest advancements, aligning seamlessly with our existing software strategy, product portfolio, and partnerships. We are fortifying our technological prowess and competitive edge.”
Rivian’s Founder and CEO, RJ Scaringe, expressed:
“We are thrilled to announce this partnership with Volkswagen Group. Since Rivian’s inception, we have dedicated ourselves to developing highly distinctive technology, and it is tremendous that one of the world’s largest and most esteemed automotive companies has acknowledged this. The collaboration is expected not only to expand the market reach of our software and zonal architecture through Volkswagen Group’s global presence but also to support our significant growth by meeting our capital requirements. Rivian was founded with the mission to facilitate the world’s transition away from fossil fuels through innovative products and services, and this partnership aligns perfectly with that mission.”
Aligned with the strategic vision of their partnership, Volkswagen Group intends to inject $5 billion into Rivian. Initially, Volkswagen Group plans to invest $1 billion in Rivian through an unsecured convertible note, which will convert into Rivian’s common stock under certain conditions following regulatory approvals and no later than December 1, 2024¹. Additionally, Volkswagen Group is slated to provide an additional $4 billion as part of the collaboration².
Extensive work has been undertaken over recent months to verify the compatibility of Rivian’s electrical architecture and software with Volkswagen Group’s vehicles. The completion of the Joint Venture formation is expected in the fourth quarter of 2024. All transactions outlined in this announcement are contingent on the finalization of definitive agreements, fulfillment of stipulated conditions within those agreements, and receipt of necessary regulatory approvals. Lazard is the lead financial advisor, with BDT & MSD Partners as financial advisor to Rivian.
Editors’ Notes:
¹ The conversion pricing for half of the total amount under the note will be determined based on a specified daily volume-weighted average price (VWAP) preceding this announcement, and for the remaining half, it will be based on a specific daily VWAP prior to the conversion date.
² The additional investment up to $2 billion in Rivian’s common stock comprises two tranches of $1 billion each in 2025 and 2026, with pricing linked to a certain daily VWAP of Rivian’s common stock preceding each respective purchase. The $2 billion investment associated with the JV is to be allocated between an initial payment at the onset of the JV and a loan availability in 2026.
SOURCE: Rivian
