What we know!

What we know so far is sparse as details are somewhat light at this time, but VW Group plans to invest in Rivian, thus leveraging the California company’s electrical architecture and license its software. This will take place through a 50/50 joint venture that should be finalized by year’s end. This deal carries with it great potential, specifically that it will affect not only VW models, but also those from Audi, Porsche and Bentley, plus other brands not sold in the U.S.

To achieve this end goal, VW Group will begin first by integrating Rivian’s current software and electrical architecture into its brands’ vehicles. The companies have already been collaborating the past several months, they announced, so as to ensure Rivian’s tech can be adapted to VW Group products. This specifically applies to software that is used to run the vehicle as opposed to what drivers see on the screens.

These products that bear the new Rivian software and electrical architecture are expected to make their debut in the second half of the decade, the partners announced as part of a joint release. The R2 midsize SUV is planned to be the first Rivian product to feature the new software architecture, which is “zonal” in that electronic control units (ECUs) are responsible for multiple vehicle functions in their zone and communicate amongst themselves in a common software language.

Traditionally, vehicles have used a collection of ECUs designed and built by the separate suppliers who provide various vehicle systems. Since they each speak their own programming language, overarching software is required to allow them to communicate with each other. By contrast, Rivian’s zonal architecture relies on custom in-house designed and built ECUs capable of controlling multiple functions. What remains unclear is if Rivian will provide complete ECUs to VW or license its designs to enable VW to produce them locally.

This infusion of $5 billion represents a lifeline for Rivian in many ways, but for VW it signifies something much deeper. It is an admission of great proportion that their Cariad software division has failed to create a competitive product, and therefore a major change to better that situation is greatly needed.

More about Cariad!

There have been a plethora of problems linked to Cariad basically from the start. So problematic, that last year there were even reports that Audi was considering buying software from a Chinese OEM rather than wait for Cariad. Problems with this software resulted in delays in releasing not only VW products but also Audi and Porsche products. In addition, Cariad underwent two restructurings last year which resulted in layoffs of thousands of employees as VW attempted to correct the situation. It is unclear how this struggling division will fare based on this recent collaboration.

More facts!

Overall, this financial boost from VW could very well help Rivian eventually reach profitability as well as assist with the launch of the R2 midsize SUV at its Normal, Ill., plant, the construction of its delayed Georgia plant and the launch of the R3.

VW plans to invest the first $1 billion between now and Dec. 1 as an unsecured convertible note that will convert to Rivian common stock once all regulatory approvals are granted. VW will then buy another $1 billion of the same in 2026, with the remaining $2 billion split in half with $1 billion invested in the joint venture immediately and the other $1 bullion made available as a loan in 2026.

This unprecedented deal is definitely one to follow, and one in which benefits are vast. A win-win in many ways, this joint venture has all the makings of success. The deal is sealed! See what lies ahead!