Volkswagen plans to invest billions in electric SUV pioneer Rivian

Volkswagen is seeking help from Tesla challenger Rivian for electric cars - and is putting billions on the table to do so. Europe's largest automaker plans to spend up to five billion dollars and jointly develop technology for future vehicles. For Rivian, this is a highly welcome cash infusion: the company is still in the red and is currently struggling with declining interest in electric cars in the USA. The recently struggling Rivian stock soared almost 50 percent in after-hours U.S. trading. The cooperation is quite narrowly focused: software, control computers, and network architecture. A key point: Volkswagen will switch to Rivian's technology and software for new cars in the second half of the decade. The automotive giant could save a lot of money compared to developing the technology in-house. Rivian CEO RJ Scaringe emphasized in a conference call on Tuesday that other areas such as batteries or propulsion technology were not part of the partnership.

Rivian has so far been mainly active in the commercial vehicle sector in cooperation with Amazon and the all-electric delivery vehicle EDV. Initially, Ford was also a partner, but it ended this commitment shortly afterward without result and sold almost all shares again in February 2023.

To offer manufacturers new features, cars have accumulated more and more control units and longer cable harnesses over the years. With the advance of electric cars, a competition for new vehicle architectures also began. The trends: less complexity and a focus on software. Tesla was a pioneer - a computer on wheels.

Rivian's architecture: zone model instead of too many small computers

Rivian developed its architecture from the start, dividing the car's electronics into several zones with their computers. In the first generation of the Rivian platform, 17 control units were needed, Scaringe said. Now, in the second generation, they have reduced the number to seven. VW has struggled for years with problems in its in-house software development for electric cars, causing delays in model launches. Scaringe pointed this out on Tuesday. Over the past few years, it has become clear that established manufacturers have difficulties with their software.

He sees the reason in how the automakers' business has run for decades: much of the technology was purchased from various suppliers, "resulting in a lot of small computers tied to very specific functions." Coming from that world, it is difficult to develop an architecture based on the zone principle, where one control unit takes over functions across multiple areas. Rivian arranged these ECUs (Electronic Control Units) distributed throughout the vehicle to shorten the data transmission path.

Expert: A bargain for VW

Rivian is one of the few manufacturers to have such a zone architecture in series production - and thus valuable for VW, commented Pedro Pacheco, an automotive analyst at the market research firm Gartner, on the deal. Considering how much money Volkswagen has already invested in developing its platform, the billions for Rivian are "a real bargain" for the German company. The deal also sends a signal that things once developed in-house may now come from another manufacturer. At the same time, Pacheco raised the question of what manufacturers will do with their in-house car software teams if they outsource so much.