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Volkswagen, one of the longest-established and largest automotive manufacturers, is entering into a new partnership with Rivian, a company that has released two versions of a single model in just six years. Through this collaboration, Volkswagen will gain access to Rivian’s innovative platform technology, while Rivian will receive a substantial financial investment. With VW preparing to roll out its own Scout electric SUV brand soon, we can expect that some of Rivian’s technology may play a crucial role in these upcoming vehicles.
This partnership makes sense as Rivian seeks financial support and VW aims to enhance its electric vehicle lineup. However, the arrangement is not merely a case of one company purchasing another’s technology. As announced by Rivian and VW AG:
“Initially, Volkswagen Group will invest $1 billion in Rivian via an unsecured convertible note, which will convert to Rivian’s common stock upon meeting specific conditions after receiving regulatory approvals or by December 1, 2024. Furthermore, Volkswagen Group is expected to invest an additional $4 billion as part of this deal.”
Further clarification reveals:
“The conversion price of half of the loan amount will be determined based on a specific daily volume-weighted average price (VWAP) prior to this announcement, while the price for the remaining half will be based on a daily VWAP before the conversion.”
Additionally:
“An extra investment of up to $2 billion in Rivian’s common stock is anticipated to occur in two installments of $1 billion each in 2025 and 2026, with the pricing determined by the daily VWAP of Rivian’s stock prior to each purchase. This $2 billion investment associated with the joint venture is expected to be divided between an initial payment and a loan scheduled for 2026.”
From my perspective, this appears to be a significant victory for Rivian. It should alleviate some pressure on their retail operations as they strive to generate sufficient revenue to sustain their research and development efforts.
The announcement regarding this partnership states that VW and Rivian are “expressing their intention to establish an equally controlled and owned joint venture (JV) focused on developing next-generation electrical architecture and state-of-the-art software technology.” The use of the term “intention” indicates that formal agreements are still pending, but the issuance of a press release suggests they are close to finalizing the deal.
A particularly interesting detail is found in the statement: “Both companies aspire to introduce vehicles that incorporate the technology developed through this joint venture in the latter half of the decade. In the short term, the JV is expected to enable Volkswagen Group to leverage Rivian’s existing electrical architecture and software framework. The partnership’s goal is to expedite Volkswagen Group’s plans for software-defined vehicles (SDV) and facilitate a transition to a purely zonal architecture. Each company will continue to operate its respective vehicle businesses independently.”
The zonal architecture mentioned refers to how Rivian structures the computer systems managing its vehicles. This was highlighted in our recent review of the Rivian R1S, where the company emphasized its ability to minimize physical wiring and components by consolidating electronic control units and functions into “zones.” The fact that VW is opting to purchase this technology shows its significance.
Both companies hope to introduce new vehicles featuring this technology between 2025 and 2030. This timeframe could align with the anticipated launch of the Rivian R2, which is expected to be released around that time, as well as the new Scout, expected to debut this summer.
The Scout nameplate harks back to the 1960s and 1970s when the original Scouts were simple SUVs produced by International Harvester, a company initially known for agricultural machinery that cleverly marketed 4x4s as family vehicles. However, these models were often seen as ahead of their time in some respects and lacking in others—compared to Ford Broncos and Chevy Blazers, they fell short. The last International Harvester Scout was manufactured in 1980. Volkswagen has since acquired the brand and plans to bring it back as an electric SUV, which is expected to be revealed soon (with a stated debut by late summer 2024, while the sales timeline remains to be announced).
It’s also worth noting that some former Rivian employees have recently transitioned to Scout, which might signal intriguing dynamics between the two companies. I know of one individual personally, but there’s no need to highlight them specifically, and it’s possible there’s nothing to infer from this. After all, it’s only logical that talented individuals from one electric vehicle company would be recruited by another. Nonetheless, any indication of interactions between Rivian and Scout piques my interest.
This brings us to an essential question that arose when I learned about Rivian and VW’s collaboration: what implications does this hold for Scout? I reached out to them and received the standard response: “We do not have a comment to share from Scout Motors at this time.”
My speculation is that VW AG executives determined some time ago that their own EV platforms would not effectively compete in off-road capabilities against Rivian, Hummer EV, and electric versions of the Mercedes G-Wagen without significant cost. They know that if the new Scout doesn’t deliver impressive performance, it will struggle because, despite my hopes, it likely won’t be budget-friendly. The stakes for Scout’s launch are incredibly high; its only existing fans are nostalgic individuals like myself who are tough to impress, and it’s an unfamiliar name for most consumers. While Tesla can generate hype for products that are functionally lacking, Scout needs to enter the market with a strong value proposition.
In summary, it’s reasonable to conclude that Scout is looking to fast-track its product development by leveraging the advancements already made by Rivian through this partnership. If that results in decreased costs for consumers, I find that quite exciting.
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