Volkswagen’s Rivian Investment – Software or Scout?
By Edward A. Sanchez — June 28, 2024
The automotive and investment worlds were surprised earlier this week when news that the Volkswagen Group had committed to a $5 billion investment into EV startup Rivian. Although Rivian has made great progress in simplifying the electronics architecture of its R1-series models, and cut its losses on a per-vehicle basis by roughly a third, the infusion of support from Volkswagen was likely a huge relief and a much-needed morale booster.
On the surface, and according to the official public press release, the nature of the investment involves the creation of a joint-venture for development of software-defined vehicles. The issues with VW’s CARIAD vehicle software division are well-documented, making investment with a partner with greater expertise in this area a logical step.
But the more the gears in my mind started turning, I had a lightbulb moment. I think the unspoken reason for VW’s investment in Rivian is to turbocharge the development of its Scout utility vehicle sub-brand.
As Phil Royle and I discussed in Episode 177 of The Watt Car podcast, VW likely did an internal market analysis identifying the competitive landscape for the Scout, which likely included Jeep, Land Rover, Toyota (with the Land Cruiser), and Rivian. Of those brands mentioned, Rivian indisputably has the most advanced EV powertrain and chassis technology and development. Since Rivian is a publicly traded company, VW was likely keenly aware of Rivian’s financial situation.
Development of a clean-sheet vehicle is a multi-year, multi-billion-dollar proposition. The vehicle type and market positioning of Scout would be different from what Volkswagen had ever done before. You could make the case that the first-generation Touareg was somewhat conceptually similar, but the Piëch-era hubris of designing and marketing six-figure VW-branded vehicles fell flat in the North American market, where the Touareg and Phaeton effectively competed with the VW Group’s own Audi brand.
In the space of a pure-play EV premium sport utility/pickup brand, there is one clear leader, and Rivian is it.
I’m not so cynical as to think that VW will simply re-skin the R1T and R1S and call them Scouts. But on the same token, VW would be foolish not to explore some of Rivian’s engineering and development expertise to apply to the Scout brand. This partnership could also help expedite Rivian’s international expansion, with the R3/R3X in particularly being well-suited to European tastes and preferences.
Just as rumors of Hyundai Group partnering with Lucid to supply powertrain technology to a future limited-edition Genesis model, it’s entirely conceivable Rivian could supply powertrains to Scout, as well as shared electronics architecture, and possibly shared development resources. I see this as a win-win for both companies.
While this investment is no guarantee of Rivian’s long-term survival, it is certainly an important institutional vote of confidence within the industry that gives Rivian a measure of assurance among investors and industry players that it didn’t have previously. I’m excited to see what fruits this collaboration will bear in the years ahead.
(Image courtesy Rivian)
