VW invests 5 billion in Rivian - because of the software

Planned Scout models to receive software from new joint venture

VW CEO Oliver Blume (left) and Rivian CEO RJ Scaringe

By: Stefan Leichsenring

Published by: Brian Potter

Jun 26, 2024 at 6:18am ET

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Volkswagen is investing $5 billion in the US start-up Rivian. The newly formed partners are also planning a mutually controlled joint venture to share electric car architecture and electric car software.

With the capital injection from VW, Rivian will be able to finalise the more affordable R2 and R3 models: The R2 is scheduled to come onto the market in early 2026, with the R3 to follow. Rivian will also benefit from lower costs for chips and other components, according to Rivian boss RJ Scaringe (to the right of VW boss Oliver Blume in the cover photo). Apparently, these parts are to be purchased together, resulting in higher quantities and thus lower prices.

Rivian R2 in size comparison with the current R1S

The Rivian R2 looks like the current R1S, but is almost 40 cm shorter and less high

VW will benefit from Rivian's patents, which will be licensed to the joint venture. The R2 will be the first vehicle to utilise software from the joint venture. Volkswagen vehicles are to follow, including cars from the Group brands Audi, Porsche, Lamborghini and Bentley.

The investment is apparently intended to help solve the VW Group's software problems. The Cariad software division has failed to meet its targets in recent years, which is said to have been one reason for the departure of Group CEO Herbert Diess in autumn 2022. The problems also led to the postponement of the market launch of the Porsche Macan Electric and Audi Q6 e-tron PPE vehicles by around a year.

VW is not investing the five billion in one go, as Reuters reports. Only one billion is to flow immediately, followed by another billion in the fourth quarter and then another billion each in 2025 and 2026. The fifth billion is to be granted in the form of a loan in 2026.

According to Reuters, Rivian makes a loss of almost $40,000 on every vehicle delivered - the R1T and R1S are currently on the market, as well as the EDV delivery van. However, thanks to drastic cost reductions in production and purchasing as well as punctual deliveries, the company, which was founded in 2019, is in a better position than many other start-ups. Even before the VW deal, the company had almost $8 billion in cash. However, the share price fell from around $27 last summer to less than $10 in April. After the VW investment was announced, it rose by around 20 per cent to $12 dollars.

Volkswagen Electric Pick-up Teaser

Pick-up model from Scout (teaser image)

Despite the weak demand for electric cars, the VW Group is sticking to its plan to launch 25 electric models on the North American market by 2030. This also includes the planned pick-ups and SUVs of the new Scout brand. These are being developed by Magna, but are to be produced by VW itself at a new plant in South Carolina. Market launch is scheduled for 2027. The software will come from the new joint venture, writes Reuters, citing VW.

More about Scout and Cariad:

Scout Motors electric pickup and SUV will be developed with Magna Steyr

Scout Electric SUV: Everything we know

Volkswagen Group to slash 2,000 jobs at Cariad, future EV platforms face delays

Audi, Porsche, Bentley EVs delayed because of underdeveloped software - report

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The bottom line

After the launch of the PPE models from Porsche and Audi had to be significantly postponed due to the software, VW wants to bring the Scout models to the US market on time. The software from Rivian is apparently intended to help with this. The Group is investing no less than $5 billion dollars in this by 2026.

Sources: Reuters, Rivian, Rivian Investorenbrief (PDF)

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