Rivian Automotive and Volkswagen Group are joining forces. The two automakers announced their intention to form an equally controlled and owned joint venture to create software-defined vehicle (SDV) platforms for the companies' future electric vehicles. An SDV is any vehicle that enables new features and manages operations primarily through software.

The partnership, anticipated to accelerate software development for Rivian and Volkswagen, is expected to allow both companies to combine their complementary strengths and lower vehicle costs by increasing scale and innovation globally.

Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade, which could help with integrating more electric vehicles into commercial fleets in the future. In the short term, the joint venture is expected to enable Volkswagen Group to utilize Rivian's existing electrical architecture and software platform

"Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost. [...] The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness," Olive Blume, CEO of Volkswagen Group, said.

Rivian's in-market zonal hardware design and technology platform are expected to serve as the foundation for future SDV development, which will be applied to both companies' electric vehicles. Rivian plans to contribute its electrical architecture expertise and license existing intellectual property rights to the joint venture.

"Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it's exciting that one of the world's largest and most respected automotive companies has recognized this," RJ Scaringe, Founder and CEO of Rivian, said. "Rivian was created to help the world transition away from fossil fuels through compelling products and services, and this partnership is beautifully aligned with that mission."

Volkswagen Group to Invest in Rivian

Volkswagen Group plans to invest $5 billion in Rivian to support the strategic partnership's vision.

Initially, Volkswagen Group will invest $1 billion in Rivian through an unsecured convertible note that will convert into Rivian's common stock subject to certain conditions upon receiving regulatory approvals and reaching December 1, 2024. Volkswagen Group is expected to invest a further $4 billion in the transaction.

"Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group's global reach, but this partnership also is expected to help secure our capital needs for substantial growth," Scaringe said.

Joint Venture Plans for Q4 Formation

Over the past months, work has been done to test that Rivian's electrical architecture and software are compatible with Volkswagen Group's vehicles.

The partnership aims to accelerate Volkswagen Group's SDV plans and transition to a pure zonal architecture. Each company will continue to operate their respective vehicle businesses separately.

The companies expect the completion of the joint venture formation in the fourth quarter of 2024.