Rivian and Volkswagen Group announced the formation of a joint venture aimed at developing vehicle software.

According to a CNN report, Volkswagen will invest a total of $5 billion in the struggling electric vehicle (EV) maker Rivian, including an immediate $1 billion infusion.

The collaboration, yet unnamed, was announced Tuesday and will feature co-leaders reporting to both automakers. During a conference call, Rivian CEO RJ Scaringe explained that the 50/50 joint venture would have two co-CEOs who would effectively report to both companies.

A Win-Win Deal For Both Car Makers

Volkswagen's investment will provide Rivian with the necessary capital to scale up its manufacturing, including plans for a new factory in Georgia. Scaringe highlighted the financial importance of this partnership, noting that Rivian's success is integral to Volkswagen Group's success.

Rivian's foundational vehicle software design will be the basis for the new company's software, including user-interface software for entertainment systems and deeper vehicle software for motors. Rivian will also contribute its electric hardware designs to the project.

Volkswagen's existing vehicle software subsidiary, Cariad, will continue its work independently of the new joint venture. VW CEO Oliver Blume confirmed that the new collaboration will complement Cariad's efforts rather than replace them.

While there is potential for future vehicle collaboration, the current focus is solely on vehicle software and computer systems. Scaringe and Blume discussed the idea for the joint venture at Porsche's Experience Center in Atlanta.

Scaringe said they "quickly realized" their similar interests, which led to serious discussions about collaboration.

TechCrunch reported that, in addition to the immediate investment of $1 billion, VW Group will convert an unsecured convertible note into Rivian's common stock after regulatory approvals, which is expected in the fourth quarter of this year. VW will invest $1 billion in Rivian's common stock in 2025 and 2026. The remaining $2 billion will be allocated to the joint venture through an initial investment and a loan in 2026.

The joint venture will benefit from Rivian's electrical architecture expertise. Rivian is expected to license existing intellectual property rights to the venture.

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Camouflaged Audis Sent to Rivian

Through the partnership, Volkswagen will access Rivian's high-performance, cost-effective EV technology, considering traditional car manufacturers have struggled to compete with Tesla in EV technology. Volkswagen's Cariad was established to address this but has faced delays and financial losses due to slow decision-making.

Following the initial discussions, teams from both companies visited each other's facilities, according to a WION report. Rivian engineers traveled to Germany in the fall, and a testing phase in California involved camouflaged Audis.

Volkswagen's leadership emphasized embracing Rivian's agility, especially in software development. However, according to a source close to Volkswagen, full-fledged testing is still needed to ensure seamless functionality of VW vehicles equipped with Rivian's software.

The prospect of Rivian technology powering future Porsches is fascinating for Scaringe, a self-proclaimed Porsche enthusiast. He said he "can't wait to see Porsche on the road" with Rivian's tech.

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