Volkswagen
Rivian vehicles provide ample off-road performance with their 4WD capability – something most other cars cannot. To truly experience off-road action, however, you need a vehicle equipped with 4WD capability – something Rivian excels in providing.
Volkswagen announced Tuesday it would invest $5 billion in Irvine-based Rivian to form an equal joint venture for developing electric vehicle software development, sending shares soaring and raising its market cap by nearly $82 billion.
Volkswagen | The Joint Venture
Joint ventures are agreements between two or more companies to share costs, risks and rewards of a project. They also allow existing businesses to expand into new lines of business without taking on all costs themselves. Joint ventures offer many advantages from accessing new markets to reducing financial and operational burdens.
Joint ventures often form for specific projects and often end when these ventures have concluded, such as between construction companies to manage major developments or technology companies working on research and development together.
Legal structure of a Joint Venture is critical as it sets the level of responsibility each party assumes. While a written contract should take precedence over other documents like articles of association, any disputes should be decided according to its terms.
Joint Ventures and partnerships share many similarities, yet differ significantly in some key ways. Both involve co-ownership of a business enterprise and sharing profits and losses along with governance responsibilities; however, JVs typically tend to be more structured than partnerships in terms of structure. A JV is also considered different business entity than partnerships for tax reasons – ultimately making the decision between creating one or the other up to those involved and their goals.
Volkswagen | Rivian’s R2 and R3 SUVs
Rivian’s R2 and R3 SUVs were intended to be less costly alternatives to its flagship models, widening customer base and turning cash flow positive for the company. But with higher interest rates making financing vehicles increasingly costly for consumers, they have become wary about spending their money. Wall Street is disappointed about EV sales; Rivian missed earnings estimates in its most recent earnings report.
Rivan’s R3 is built upon the same platform as its larger R2, but features a five-inch shorter wheelbase. Positioned as an entry-level model and priced around $45,000, reservations begin now and deliveries should commence by 2026.
Rivian has designed its R3X for sportier adventures, with three electric motors and wider wheels and tires, creating more ground clearance. Rivian calls this “rugged playful.”
Rivian vehicles are more cost-effective to produce than previous models thanks to an innovative structural battery unit which reduces complexity and costs, and leverage existing manufacturing and supply chain infrastructure. They will be produced at its existing Normal, Illinois factory; Rivian believes that taking this approach significantly decreases launch and ramp risks; efficiently repurposes R1T/R1S/EDV production lines without incurring unnecessary expansion costs; as well as eliminating a costly expansion plan at current Normal plant location.
Volkswagen | Rivian’s factory in Georgia
Rivian began arriving in Morgan County a few months ago to begin grading its planned 2,000-acre site for its planned factory, however after seeing slowing growth in sales of electric vehicles the company announced they were postponing Georgia plans and shifting production to Illinois instead. This move could save Rivian an estimated $2.25 billion – significant sum for an early stage startup which loses thousands per vehicle sold.
The partnership focuses on creating software to develop electric vehicles, helping both companies reduce operating costs and bring their models closer to gasoline-powered car prices. Vehicles powered by this software developed through this partnership will be sold under Volkswagen’s Audi, Porsche and Lamborghini brands in North America; Rivian Scout brand vehicles may also utilize this software, according to CEO RJ Scaringe of Rivian Scout brand vehicles.
The two companies will collaborate on design, engineering and manufacturing efforts utilizing each company’s respective expertise. The partnership will be overseen by two co-leaders who report back to each automaker. Investors have responded positively to this announcement with Rivian shares increasing by more than 6% following it – particularly as demand for electric vehicles (EVs) slows and battery prices drop making EVs more accessible for consumers.
Volkswagen | Rivian’s stock
Rivian stock surged nearly 50% after Volkswagen announced they would invest $5 billion to develop electric vehicle software. Volkswagen’s investment will give Rivian access to funds needed for developing new vehicles while increasing its market value by approximately $6 billion.
Rivian will benefit from this agreement by cutting its costs and production expenses, two of the key issues facing its EV startup. Rivian has experienced mounting losses as it sells vehicles that come well below their cost of goods sold and burns through cash quickly – it lost $39,000 per vehicle sold during its inaugural quarter alone.
Rivian has made significant efforts to strengthen its finances and refocus its business strategy in 2018. As part of this endeavor, unneeded steps were eliminated from its manufacturing process while materials costs were decreased significantly – both measures that are expected to reduce production expenses and bring down production expenses.
Rivian will collaborate with Volkswagen through a joint venture to apply its technology into vehicles that VW plans to sell by mid-decade. Rivian software will be utilized on Audi and Porsche models as well as Volkswagen’s planned electric off-road SUV Scout, potentially opening doors for sales of Rivian’s vehicles under its brand across Europe and Asia.
