What lies behind Volkswagen's investment in Rivian

Germans fund start-up with 5 billion to get their hands on new technology: blame delay on electric cars

By: Riccardo Ciriaco

Jun 30, 2024 at 6:09am ET

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Up to $5 billion, or approximately £3.95 billion: it is a major cash injection that the European Volkswagen is making into the American Rivian, for a financial operation that has surprised everyone a little, among insiders and stock markets.

But now the question arises. What drove the German group to believe so strongly in a partnership with a rival company (at least overseas)? Let's start with the official communications, which speak of:

creation of a 50-50 joint venture focused on software-defined electric car technologies
VW's entry into the start-up's capital
permission to use Rivian patents in Volkswagen Group vehicles

But behind the scenes there are other dynamics at work.

Cariad bankruptcy

Revealing the background is the British news agency Reuters, which points out that the agreement between the two companies is only the latest in a series that began in September 2022, when the then CEO Herbert Diess was forced out of office to make way for the group's current number 1, Oliver Blume.

The display of the Volkswagen ID.3

A change at the top was the result of the manufacturer's difficulties in making the transition from the combustion engine to the electric motor, a sector where knowledge of technologies such as batteries, charging and software is required that Volkswagen does not have.

It was to be the Cariad unit, founded in 2020, that would develop ad hoc solutions for the vehicles of tomorrow and compete on an equal footing with Tesla. However, the mission has partially failed, with delays and losses slowing down the projects in the pipeline, also due to internal decision-making cumbersomeness, and that is why alliances with Rivian and others came into play.

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What happens now

The new CEO is in fact trying to speed up the process by drawing on manufacturers born with the aim of developing exclusively electric vehicles such as the US company led by RJ Scaringe, or the Chinese company Xpeng, with which Volkswagen entered into a partnership last summer to build platforms to be fitted in cars in the shadow of the Great Wall.

The future Volkswagen-Xpeng platform

The German group will now hold up to 25 per cent of the shares in Rivian, ousting the current majority shareholder, Amazon, which holds 16 per cent. The fate of Cariad, however, is difficult to predict. On the one hand, there is the head Peter Bosch, who is sure of maintaining the helm of a ship that will not sink, but on the other hand there are both the experts, who are not exactly convinced of the division's future, and VW's shareholders, who have coolly welcomed the investment, considered too onerous. The fall in the stock market confirms this.