July 21, 2024
Electric & Hybrid Cars

VW’s $5 billion Rivian Bet: The Secret Meeting of Top Executives in Cloaked Audis

SAN FRANCISCO/BERLIN — Several disguised Audis were discreetly transported from Germany to a Rivian facility in California earlier this year. At the facility, around 30 engineers from the U.S. startup stripped the electronics from the Audis and installed Rivian’s harnesses and modules.

Extensive testing followed at Rivian’s Palo Alto facility to assess how the U.S. startup’s architecture and software, which controls virtually every function, would integrate with the German cars.

The objective was to determine if future electric vehicles from Audi’s parent company Volkswagen could benefit from Rivian’s advanced technology, according to sources familiar with the deal. One of the sources confirmed that some Audis were indeed sent to California.

The outcome of this collaboration led Europe’s largest carmaker to announce a significant investment of up to $5 billion in Rivian, as the two companies agreed to a technology joint venture.

The secretive nature of the deal caught the auto industry and investors off guard. Details of how the partnership came about have not been previously disclosed.

Rivian CEO RJ Scaringe told Reuters, “I think it’s an accomplishment in its own right that this hasn’t leaked, given the amount of work that’s already happened… and the number of people involved across our teams.”

Rivian and Volkswagen maintained a high level of secrecy during the collaboration, with the aim of testing the compatibility of their technologies. One source described the efforts as “super secretive,” with a focus on ensuring the successful integration of electrical systems.

The three sources requested anonymity as they were not authorized to share these details with the media.

Volkswagen and Rivian did not respond immediately to requests for comment outside of normal business hours in Europe and the U.S.

‘A SIGNIFICANT PARTNERSHIP’

This agreement holds immense significance for both companies.

For Rivian, renowned for its R1S SUVs and R1T pickups, the partnership provides the necessary financial support to navigate a downturn in EV demand, produce its more affordable R2 SUVs, and ultimately achieve profitability.

Additionally, the collaboration may enable Rivian to negotiate better terms with suppliers and procure components in larger quantities with the backing of Volkswagen and its affiliated brands such as Audi, Porsche, Lamborghini, and Bentley.

Rivian’s shares surged by 23% following the announcement.

For Volkswagen, the deal presents an opportunity to gain access to cost-effective, high-performance EV technology that traditional automakers have struggled to develop internally.

The group’s software unit Cariad, established in 2020 to compete with EV market leader Tesla, has faced challenges and delays, partly attributed to slow decision-making within the company’s management.

According to Scaringe, discussions leading to this transformative partnership began with a private meeting between him and Volkswagen CEO Oliver Blume at Porsche’s experience center in Atlanta.

Two sources indicated that the meeting took place in August of the previous year.

“We delved deep into product discussions and exchanged thoughts on our preferences,” Scaringe shared with reporters. “It quickly became apparent that we shared common interests in vehicle development, leading to serious conversations about collaboration.”

‘A DETAILED COLLABORATION’

Following the initial meeting, the companies wasted no time and a Rivian team visited Volkswagen in Germany that autumn.

The testing phase to ensure seamless integration was likened to a scrimmage by Scaringe during a company townhall. Subsequent trips to Germany with legal and software experts took place early in the following year.

Volkswagen demonstrated a more flexible approach compared to the past under Blume, showing a willingness to engage external partners alongside its in-house efforts, as per a fourth source familiar with the discussions.

To address potential challenges stemming from differing work cultures, Volkswagen’s leadership agreed to embrace Rivian’s agility, as explained by the software chief Wassym Bensaid during an analyst briefing. The joint venture was outlined with clear rules and responsibilities.

These statements aimed to reassure Volkswagen investors concerned about potential conflicts between the company’s traditional manufacturing processes and Rivian’s more agile software approach.

While Volkswagen’s shares dipped by 2% following the announcement, investors also expressed unease over increased spending considering the company’s already significant capital expenditure compared to its peers.

After running comprehensive tests on the Audis in Palo Alto earlier this year, which arrived in the first quarter, financial discussions between the companies ensued over the past few months, according to one source.

A fifth source, with ties to Volkswagen, mentioned that extensive testing is still required to ensure that VW vehicles equipped with Rivian software operate with full functionality.

“This partnership is the result of long-term collaboration and dedication,” Scaringe emphasized in his conversation with Reuters. “It has been a work in progress for quite some time.”

For Scaringe, a Porsche enthusiast who grew up restoring classic 356s, seeing the company’s technology in Porsche vehicles on the road is a source of great excitement.

“To witness a Porsche vehicle incorporating our technology is truly thrilling for me,” he expressed.

FAQ

What is the significance of the partnership between Rivian and Volkswagen?

The collaboration allows Rivian to access crucial financial support and enables Volkswagen to leverage advanced EV technology.

How did the partnership between Rivian and Volkswagen come about?

The discussions began with a private meeting between Rivian CEO RJ Scaringe and Volkswagen CEO Oliver Blume at Porsche’s experience center in Atlanta.

Conclusion

The partnership between Rivian and Volkswagen signifies a significant step forward in the EV industry, bringing together advanced technology and financial support to drive innovation and collaboration in the automotive sector.

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