July 23, 2024

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Volkswagen and Rivian form joint venture to advance EV technology and software

5 min read

Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.

I’m Steve Greenfield from Automotive Ventures, and I’m glad that you could join us.

In news this week that might signal additional future partnerships between legacy automakers and newer upstarts, we hear that Volkswagen Group and Rivian are forming a joint venture to share electric vehicle (EV) architecture and software. 

The JV will be equally controlled by both companies. As part of the agreement, Volkswagen will initially invest $1 billion into Rivian in the form of convertible notes, with up to $4 billion in additional investments over time (the $4 billion being $2 billion of investment in Rivian shares and $2 billion related to the new JV).

This news comes at a great time for Rivian, which has a tenuous path ahead as it pushes to develop its mass-market R2 SUV.

But it also gives Volkswagen another option for advancing its own software competency — something it has struggled with during its transition to electric vehicles. 

As part of the deal, the two companies will create a joint venture to develop and grow the technology. It will be a 50-50 partnership with co-CEOs, who will report into both Rivian and Volkswagen Group. Rivian will share its electrical architecture expertise with VW and is expected to license existing intellectual property rights to the joint venture.

This arrangement will give Volkswagen access to Rivian’s existing electrical architecture and software platform. All Volkswagen Group subsidiaries are included in this deal, which could bring Rivian DNA into brands like Porsche and Audi and even the conglomerate’s own EV upstart, Scout Motors.

It’s possible that the joint venture will sell its tech to other companies down the road, too.

The news comes just weeks after Rivian started producing the next generation of its R1T pickup truck and R1S SUV, an upgrade that reworked the technology within its vehicles, changing everything from the battery pack and suspension system to the electrical architecture, interior seats and sensor stack.

Rivian’s new electrical architecture and compute platform reduced the number of electronic control units (ECUs) used to control the vehicle from 17 different ECUs in its first generation to seven. This new zonal architecture allows Rivian to cut more than 1.6 miles of wiring from each vehicle (a 44-pound weight savings) and to build its vehicles faster.

That new electrical architecture is seen internally as a key innovation at Rivian and one that allows the company to wirelessly update software. The new zonal architecture supports Rivian’s software stack, which was also developed and deployed in-house. That software stack includes everything related to real-time operating systems that manage the car, such as thermal dynamics, ADAS and safety systems, as well as another layer related to the infotainment system.

Rivian and Tesla both use a zonal architecture — which many believe is the foundation to what the industry calls software-defined vehicles. Software-defined vehicles also offer automakers an opportunity to add revenue streams via in-car entertainment and services.

In 2021, VW Group said their software unit Cariad could generate as much as $1.4 trillion in revenue by 2030, via subscriptions and other sales.

VW has long professed a goal to bring advanced software that is easy to update to its entire portfolio. But the company, and Cariad, has been plagued with delays and executive turnover. Last October, Volkswagen Group’s board approved restructuring Cariad, a move that included cutting as many as 2,000 workers and further delayed the launch of VW’s new software architecture by 16 to 18 months.

Rivian gets the thing it needs most out of its deal with Volkswagen, which is cash. Rivian is expected to burn through $4.1 billion of cash this year. Volkswagen, on the other hand, tosses a hail mary pass to (hopefully) solve its software issues.

It sounds like a win-win situation, or at least in theory. The reality will depend partly on how well they work together in a joint venture that neither side will control.

We assumed Rivian would need to raise more capital, and Volkswagen’s investments in Rivian will prove valuable in helping it achieve the scale necessary to eventually get to positive free cash flow. Rivian could also see potential benefits from material cost savings and operating efficiencies that would help improve its cost position and ultimately higher gross margins.

Rivian is now one of the most viable among the start-up EV automakers with attractive product, solid long-term strategy, and adequate funding well into 2025 and beyond.

So, with that, let’s transition to Our Companies to Watch.

Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, we showcase a company to watch, and take the opportunity here each week to share that company with you.

Today, our new company to watch is UNIGRID Battery.

UNIGRID Battery is developing safe, affordable, and sustainable sodium-ion batteries.

UNIGRID adopts abundant sodium chemistries free of rare elements.

Sodium-ion batteries have several advantages over competing battery technologies. Compared to lithium-ion batteries, sodium-ion batteries have somewhat lower cost, better safety characteristics, and similar power delivery characteristics, but also a lower energy density.

Sodium is 1000 times more abundant than lithium, potentially reducing supply chains and lowering battery costs. Other advantages of sodium-ion batteries include high power, fast charging, and low-temperature operation.

Using a dense alloy anode and a non-flammable electrolyte, UNIGRID’s battery is suitable for a wide range of applications.

As a result, UNIGRID’s batteries are low-cost, energy-dense, long-lasting and safe.

If you’d like to learn more about UNIGRID Battery you can check them out at www.unigridbattery.com

So that’s it for this week’s Future of Automotive segment. 

If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our DealerFund.

If you’re interested in joining our Investment Club to make direct investments into AutoTech and Mobility startups, please join. There is no obligation to start seeing our deal flow, and we continue to have attractive investment deals available to our members.

Don’t forget to check out my book, “The Future of Automotive Retail,” which is available on Amazon.com. And keep an eye out for my new book, “The Future of Mobility”, which is almost done, and will be out soon.

Thanks (as always) for your ongoing support and for tuning into CBT News for this week’s Future of Automotive segment. We’ll see you next week!


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