I=8
Volkswagen shifts strategy to develop next generation software-defined vehicle (SDV) as a joint venture with Rivian and not internally with Cariad
- Volkswagen is investing $1 billion in Rivian Automotive.
- Addionally, the two companies will create a joint venture (50% stake by each company) for a joint creation of a electrical/electronic architecture for EVs.
- The investment by Volkswagen could rise by another $4 billion by 2026 subject to further review of the technical feasibility of Rivian’s existing E/E architecture on Volkswagen’s vehicles.
- Volkswagen will pay out $2 billion in 2024, hence they are lowering their automotive cash flow guidance to a range of 2.5 billion EUR and 4.5 billion EUR (previously: 4.5 billion EUR to 6.5 billion EUR) and liquidity to a range of 37 EUR billion and 39 billion EUR (previously: 39 EUR billion to 41 billion EUR).
- In a webcast call, Volkswagen said the investment is not part of the 180 billion euros budgeted for 2023 to 2027 but the benefits will drive down costs in future.
- They also pointed out in the call that the partnership will hit products coming in in the second half of 2025.
Wiki article: Volkswagen:Strategy - InvestmentWiki
Assessment
Rivian is one of the few automakers that have adopted zonal architecture which significantly reduces the cost of producing EVs. Also its products look good. I specifically liked that the controls and the display on the steering wheel work seamlessly (min 6:00). As such, the partnership puts Volkswagen steps ahead in the development of an EV architecture.
Also, the joint venture replaces Cariad in the development of high-end EV platforms (PPE and above) that it hasn’t been able to deliver due to software delays. For instance, Porsche had to delay production of the EV Macan for two years due to the Cariad issues and was only able to start production after entering into a partnership deal with Google Android Automotive. That said, I think we are now almost certain that Audi A6 e-tron and Audi Q6 e-tron will be delivered as scheduled since Volkswagen will be able to utilize Rivian’s existing architecture over the short-term -until the joint venture architecture comes in play in the second-half of 2025.