Why VW is Investing $5.8 Billion Into Rivian: For Internal Organs

[SASSquatch]

Looks like Scout Motors will also benefit along with other VW brands from this.

one thing I’m trying to understand as others have mentioned it (but went over my head): what does Rivian get from this besides the money, obviously. And the JV will have it’s expenses too - does it come from the $6b entirely so Rivian gets less than $6b?

TIA! And appreciate your responses. I’m a dummy when it comes to economics

As I have said many times - Rivian needs to explore EREV vehicles using the ICE platform developed by VW/SCOUT and that is how this partnership can fully benefit both parties.

EREVS are the future until battery technology can get smaller, lighter, denser, safer, and cheaper - probably 10 years away or more for full adoption and enough charger density nationwide.

The current ass clown of an administration is setting back nationwide charger density by at least half a decade or more. EREVs are the obvious bridge and I would rather have something on the road that meets the 90 percent use case than people continuing to drive ICE only cars or mild hybrids and not buying BEVs.

The moment you tell a consumer you get the benefits of electric propulsion 90% of the time and for road trips and towing you just put in gas and you alleviate that fear people will start adopting that technology at a higher rate.

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[Steve A.]

As I have said many times - Rivian needs to explore EREV vehicles using the ICE platform developed by VW/SCOUT and that is how this partnership can fully benefit both parties.

EREVS are the future until battery technology can get smaller, lighter, denser, safer, and cheaper - probably 10 years away or more for full adoption and enough charger density nationwide.

The current ass clown of an administration is setting back nationwide charger density by at least half a decade or more. EREVs are the obvious bridge and I would rather have something on the road that meets the 90 percent use case than people continuing to drive ICE only cars or mild hybrids and not buying BEVs.

The moment you tell a consumer you get the benefits of electric propulsion 90% of the time and for road trips and towing you just put in gas and you alleviate that fear people will start adopting that technology at a higher rate.

First of all EREVs are 100% electric propulsion but the problem is that propulsion is *fueled* by battery < 50% of the time--not 90%; in the case of Scout's EREVs, the 500 mile range is provided by the 4 cyl. gas engine w/ 15 gal tank 350 of the 500 miles which is 70% while losing major towing capacity due to the extra weight. Probably even more so for the Dodge RAMCharger that is a V6 engine w/ 27 gal. tank and 690 mile range.

AFAIC EREVs and hybrids in general are an unnecessary crutch and I put 100+ miles/day, 5-6 days/wk on my R1S.

Rivian needs to continue to focus on cost-reduction and getting R2 to market; they can't afford to expand their offerings even more.

As far as battery energy density, it's already good enough for 400+ mile ranges (see Lucid for details) and we're on the verge of solid state battery production vehicles, so more like 3-5 years rather than 10.

 

[elatrickWheels]

These range extender vehicles seem like the worst of both worlds to me. You've still got an ICE to maintain and you have to burn that gasoline off periodically or it goes stale. Maybe if it's a "gateway drug" to EVs for folks who are not ready to be early adopters of EVs, there are some merits. But if you're already on the EV side then there is little hankering over the way things used to ge.

 

[SASSquatch]

First of all EREVs are 100% electric propulsion but the problem is that propulsion is *fueled* by battery < 50% of the time--not 90%; in the case of Scout's EREVs, the 500 mile range is provided by the 4 cyl. gas engine w/ 15 gal tank 350 of the 500 miles which is 70% while losing major towing capacity due to the extra weight. Probably even more so for the Dodge RAMCharger that is a V6 engine w/ 27 gal. tank and 690 mile range.

AFAIC EREVs and hybrids in general are an unnecessary crutch and I put 100+ miles/day, 5-6 days/wk on my R1S.

Rivian needs to continue to focus on cost-reduction and getting R2 to market; they can't afford to expand their offerings even more.

As far as battery energy density, it's already good enough for 400+ mile ranges (see Lucid for details) and we're on the verge of solid state battery production vehicles, so more like 3-5 years rather than 10.

Thanks for making clear EREVS are 100% electric propulsion. Who is arguing that?

Your assertion that EREVs are an unnecessary crutch doesn't match with the reality of EV adoption and the political landscape. The goal needs to be to reduce carbon emissions. EREVs give an EV hesitant consumer a bridge to the EV experience while removing all anxiety about a woefully inadequate nationwide charging infrastructure that is now set back maybe a decade by the policies of the current administration.

Your perspective is uninformed with the reality of the dynamics of human behavior that drive mass adoption. To create a change in consumer behavior you have to incentivize that change with tangible benefit and without requiring a significant change in existing behavior. An EREV lets the average consumer experience the benefit of electrification for the 90% use case (daily driving where charging at home is sufficient, reliable, and cost effective) while removing the anxiety of dealing with an often time stressful, chaotic, and unreliable charging experience when traveling longer distances or towing.

Rivian needs MASS adoption of vehicles in order to obtain the margins they need to survive. The industry, sensing the political climate, is moving in the direction of diversification of their product lines to offer choice, including EREVs. I'm not saying Rivian shouldn't offer fully electric vehicles, but it would be smart for them to offer a product that will compete with the likes of Scout and other brands that are including EREVs. Their partnership with VW is the perfect vehicle to explore that.

In China, which dominates the worldwide EV market, most of their EVs that are being introduced are EREVs.

 

[Steve A.]

Thanks for making clear EREVS are 100% electric propulsion. Who is arguing that?

Your assertion that EREVs are an unnecessary crutch doesn't match with the reality of EV adoption and the political landscape. The goal needs to be to reduce carbon emissions. EREVs give an EV hesitant consumer a bridge to the EV experience while removing all anxiety about a woefully inadequate nationwide charging infrastructure that is now set back maybe a decade by the policies of the current administration.

Your perspective is uninformed with the reality of the dynamics of human behavior that drive mass adoption. To create a change in consumer behavior you have to incentivize that change with tangible benefit and without requiring a significant change in existing behavior. An EREV lets the average consumer experience the benefit of electrification for the 90% use case (daily driving where charging at home is sufficient, reliable, and cost effective) while removing the anxiety of dealing with an often time stressful, chaotic, and unreliable charging experience when traveling longer distances or towing.

Rivian needs MASS adoption of vehicles in order to obtain the margins they need to survive. The industry, sensing the political climate, is moving in the direction of diversification of their product lines to offer choice, including EREVs. I'm not saying Rivian shouldn't offer fully electric vehicles, but it would be smart for them to offer a product that will compete with the likes of Scout and other brands that are including EREVs. Their partnership with VW is the perfect vehicle to explore that.

In China, which dominates the worldwide EV market, most of their EVs that are being introduced are EREVs.

Your comment, "The moment you tell a consumer you get the benefits of electric propulsion 90% of the time" makes no sense then.

If the majority of the EREV range was due to the battery, then it would be worth it but not when 70%+ is due to gas. e.g. Scout BEV range is 350 miles while EREV range is 500 miles but only 150 is battery.

Also, if the political reality were really to reduce carbon emissions ASAP then the previous administration would NOT have added cultural warfare criteria to the EV tax credits , wouldn't have approved Rivian's loan without the union concession, would have delivered more than a handful of public chargers for the BILLIONS that were WASTED for that goal, and would have put solar panels on every government building. Instead, just political hypocrisy and waste as usual.

As far as China, it's a very different market than US which is a very different market than EU.

The bottom line is that Rivian needs to make a profit ASAP or go bankrupt and delivering the R2 is their prime objective; otherwise, the VW Group will be owning Rivian which is my prediction anyway.

 

[kurtlikevonnegut]

These range extender vehicles seem like the worst of both worlds to me. You've still got an ICE to maintain and you have to burn that gasoline off periodically or it goes stale. Maybe if it's a "gateway drug" to EVs for folks who are not ready to be early adopters of EVs, there are some merits. But if you're already on the EV side then there is little hankering over the way things used to ge.

I could be wrong but I really don't think EREV are targeted at current EV owners. The segment of addressable market for EREV seems to be the EV leaners who are still waiting on the sidelines. There was a study posted here showing 10-15% of buyers who current drive an ICE vehicle would be interested in an EREV but not pure EV. My expectation is that most people coming from ICE who purchased an EREV would then purchase an EV as their next vehicle.

 

[Newtonrj]

Your comment, "The moment you tell a consumer you get the benefits of electric propulsion 90% of the time" makes no sense then.

If the majority of the EREV range was due to the battery, then it would be worth it but not when 70%+ is due to gas. e.g. Scout BEV range is 350 miles while EREV range is 500 miles but only 150 is battery.

Also, if the political reality were really to reduce carbon emissions ASAP then the previous administration would NOT have added cultural warfare criteria to the EV tax credits , wouldn't have approved Rivian's loan without the union concession, would have delivered more than a handful of public chargers for the BILLIONS that were WASTED for that goal, and would have put solar panels on every government building. Instead, just political hypocrisy and waste as usual.

As far as China, it's a very different market than US which is a very different market than EU.

The bottom line is that Rivian needs to make a profit ASAP or go bankrupt and delivering the R2 is their prime objective; otherwise, the VW Group will be owning Rivian which is my prediction anyway.

Adding to "Steve A."

There is still a non-left/right coast driver community seeing EREVs as a way to drive a new without charging & range anxiety. When these ICE drivers are told the EREV RAM Charger has a V6 engine, can pull like a V8-class motor and can drive up to 690 miles, they only see that it as a 540 mile range and a 27Gal gas tank. EVerthing else is political trickery from their viewpoint.

These customers do not have home charging or a home that can add it. This is not just a rental/lease home problem but also many homes just don't have garage space to add a charger. They are also antagonistic about any public charging while on the road as this very forum community has over amplified the charging woes, lack of etiquette and costs. If an existing ICE driver wants a new replacement, they see this as an EREV only because it is still a gas motor, gas tank and no charging problems to start with.

There are many concerns ICE owners negatively point to beyond charging and batteries when looking at EV or EREVs. They include subscriptions, lack of CP/AA, fewer buttons, few or even single large screen, no key-fob or lack of a dead-battery access method, spare tires, too many cameras and the most damning, higher costs.

If a new car buyer is living in Non-California, Oregon or New York City, they see the EV mandate as political and not market driven. These buyers would rather hold on to ICE a bit longer until all the kinks were ironed out. They are welded to the dealership model including new car pickup trade-ins, oil changes and neighborhood showrooms.

As to VWG owning Rivian, that is not a remote possibility. If anyone is to own RIvian, it will be Amazon. VWG has a minority stake in the company but not enough to do anything meaningful. For today and the market Rivian finds itself competing in, they need to take as much from ICE as from any Tesla owners switching they can.

 

[Steve A.]

Adding to "Steve A."

There is still a non-left/right coast driver community seeing EREVs as a way to drive a new without charging & range anxiety. When these ICE drivers are told the EREV RAM Charger has a V6 engine, can pull like a V8-class motor and can drive up to 690 miles, they only see that it as a 540 mile range and a 27Gal gas tank. EVerthing else is political trickery from their viewpoint.

These customers do not have home charging or a home that can add it. This is not just a rental/lease home problem but also many homes just don't have garage space to add a charger. They are also antagonistic about any public charging while on the road as this very forum community has over amplified the charging woes, lack of etiquette and costs. If an existing ICE driver wants a new replacement, they see this as an EREV only because it is still a gas motor, gas tank and no charging problems to start with.

There are many concerns ICE owners negatively point to beyond charging and batteries when looking at EV or EREVs. They include subscriptions, lack of CP/AA, fewer buttons, few or even single large screen, no key-fob or lack of a dead-battery access method, spare tires, too many cameras and the most damning, higher costs.

If a new car buyer is living in Non-California, Oregon or New York City, they see the EV mandate as political and not market driven. These buyers would rather hold on to ICE a bit longer until all the kinks were ironed out. They are welded to the dealership model including new car pickup trade-ins, oil changes and neighborhood showrooms.

As to VWG owning Rivian, that is not a remote possibility. If anyone is to own RIvian, it will be Amazon. VWG has a minority stake in the company but not enough to do anything meaningful. For today and the market Rivian finds itself competing in, they need to take as much from ICE as from any Tesla owners switching they can.

If max range and towing capacity is your priority, just buy one of many diesel trucks on the market. My 2003 diesel Ford Excursion had an 800 mile range and 11k lbs towing capacity. Diesel trucks have gotten even more efficient in the last 20+ years.

VW Group has invested in this Rivian JV FAR more then Amazon and has MUCH MORE to gain then Amazon who just last year started ordering EDVs other than Rivian's. So far investment wise Rivian has been nothing but a major money loser for Amazon, whereas for VW Group Rivian could be a strategic differentiator and win across their entire portfolio of all the other companies they've purchased over the years which is their modus operandi.

 

[Thedude]

Your comment, "The moment you tell a consumer you get the benefits of electric propulsion 90% of the time" makes no sense then.

If the majority of the EREV range was due to the battery, then it would be worth it but not when 70%+ is due to gas. e.g. Scout BEV range is 350 miles while EREV range is 500 miles but only 150 is battery.

I don’t think he’s referring to 90% of the rated range but rather 90% of the usage being electric. Daily drives to work, school, etc can be covered by cheap electricity while the longer weekend trips or towing have the comfort and ease of a gasoline backup. Even on a level 1 12amp charge for ten hours each day that puts about 12kwh into the battery. Not enough to recharge for a full commute (42 mile US average) but with a 100% charge on Sunday you have enough to cover the full week of driving on electricity alone. You’d start Monday with 150 miles and have a deficit of 20 miles each day, end Friday with only 30 miles when you get back home and not have to worry about getting a full charge to get the boat out fishing with the kids Saturday morning.

That’s the main benefit I see for an EREV. Cheap(ish) daily driving with clean(ish) electricity but I can still hook up my trailer and go spend time in the boonies without caring about where the chargers are, if can I make it with only a 125 mile towing range, what if there’s a headwind today, do I need to bring a generator to charge my truck after a few days, etc.

 

[tylerdurden03]

I speculate that with shared platforms will come shared servicing. Rivian will authorize VW dealerships to service their vehicles.

That would be massive it happened.

 

[Newtonrj]

If max range and towing capacity is your priority, just buy one of many diesel trucks on the market. My 2003 diesel Ford Excursion had an 800 mile range and 11k lbs towing capacity. Diesel trucks have gotten even more efficient in the last 20+ years.

VW Group has invested in this Rivian JV FAR more then Amazon and has MUCH MORE to gain then Amazon who just last year started ordering EDVs other than Rivian's. So far investment wise Rivian has been nothing but a major money loser for Amazon, whereas for VW Group Rivian could be a strategic differentiator and win across their entire portfolio of all the other companies they've purchased over the years which is their modus operandi.

Agree that some will find diesel trucks more appealing than pure EVs. And diesels are more efficient than gas/petrol counterparts. And that there are industrial use-cases like farming, mining, minerals processing where ICE is going to rule for a while over EV or BEV solutions.

As to VWG, they did a deal with Rivian and do own 95.3M shares worth $1.198B or 8.4% of the company stock. However, Amazon got in much earlier in 2019 and currently owns 158.3M shares worth $1.98B or 14.1% of the company stock. Outside of institutional investors, Amazon is the largest shareholder. They not only bought in early, they convinced the company to produce the EDV as an exclusive for +2yrs. VWG has not as of yet asked or is expected to get production line capacity from Normal or Stanton Springs Rivian plants. Nor has VWG committed to 100k vehicle purchase and continued to reaffirm that commitment which Amazon has and continues to do.

However, to your point, VWG paid some vast money, +$5.6B to start a joint-venture where each company owns 50% of the JV. So, asserting that VWG has invested in Rivian JV FAR more is not correct in finances, nor in stock. Also, Amazon has the 'MUCH MORE to gain' in Rivian with 100k of assured deliveries which is 20% of all Normal, IL production capacity over the last two years and likely ongoing til 2030.

As for Rivian being a money loser for Amazon, that is a viewpoint. The details include that Amazon has 20k active Rivians delivering 1B packages in '24 with several but not all Amazon market locations. Amazon created the 2019 Climate Pledge to be carbon-neutral by 2040 where Rivian EDVs literally drive that statement. Amazon has more stock and more production capacity with Rivian than any other, including zero of VWG. So, making money, Rivian seems to be doing okay with Amazon EDVs. As for VWG, they own 50% of the JV. They will also issue a check for each use of the JV software as a licensee going forward. Rivian will get, not give money when VWG uses the fruits of that $5.6B JV investment.

Again, I'm not Amazon/Rivian/VWG loving or hating. Rivian has been making interplay agreements with both companies. One for production capacity and the other for SDV technology. Both complementary to Rivian producing its own R1, R2 and R3 vehicle lines. What is obvious to me is that Amazon and VWG are now necessary to Rivian as much as Rivian is to each of them.

 

[Rividiculous]

On the economic front, isn't the VW deal good for Rivian because, besides getting the huge upfront cash infusion, the JV will receive payments from VW (and Rivian) as the software platform is used, no? I have not studied the deal. I just assumed that the JV itself will have a big potential income stream--perhaps in the form of licensing out the software.

I'd also be curious to know what kind of arrangements are envisioned should other automakers join in the fun. I would assume Rivian would not have another JV type arrangement but, rather, the Volkswagen-Rivian JV would add customers.

In short, this is a potential ongoing revenue stream for Rivian, isn't it?

 

[cevans]

However, to your point, VWG paid some vast money, +$5.6B to start a joint-venture where each company owns 50% of the JV. So, asserting that VWG has invested in Rivian JV FAR more is not correct in finances, nor in stock. Also, Amazon has the 'MUCH MORE to gain' in Rivian with 100k of assured deliveries which is 20% of all Normal, IL production capacity over the last two years and likely ongoing til 2030.

I don't agree that Amazon has a larger upside here. Amazon's upside is, as you point out, buying Vans. Most vans are owned by 3rd party contractors, so it really isn't all Amazon's fleet anyway. Amazon may be getting a kickback besides the equity value of Rivian, but still it isn't much compared to the value of the whole operation.

VW though - they've already burned about 20 BILLION euro on trying to launch an internal software platform which they called Cariad. It has failed in every way - at one point, maybe more than once, including firing basically the entire team and starting over. The effort was failing again - their software was falling at an increasing rate. VW doesn't have the luxury of the time to fail again. If VW's money gets them access to Rivian's software platform, and that platform underpins all of the ID line eventually, that software access is invaluable to VW selling cars going forward.

TL;DR
Amazon upside - vans to delivery packages and perhaps return on investment
VW upside - the ability to sell cars for the next decade

 

[Newtonrj]

I don't agree that Amazon has a larger upside here. Amazon's upside is, as you point out, buying Vans. Most vans are owned by 3rd party contractors, so it really isn't all Amazon's fleet anyway. Amazon may be getting a kickback besides the equity value of Rivian, but still it isn't much compared to the value of the whole operation.

VW though - they've already burned about 20 BILLION euro on trying to launch an internal software platform which they called Cariad. It has failed in every way - at one point, maybe more than once, including firing basically the entire team and starting over. The effort was failing again - their software was falling at an increasing rate. VW doesn't have the luxury of the time to fail again. If VW's money gets them access to Rivian's software platform, and that platform underpins all of the ID line eventually, that software access is invaluable to VW selling cars going forward.

TL;DR
Amazon upside - vans to delivery packages and perhaps return on investment
VW upside - the ability to sell cars for the next decade

This is an interesting and most likely valid point. Existing Amazon vans are 3rd party owned as well as fueled. Rivian/Amazon vans are purchased by Amazon and charged (fueled) by Amazon based chargers. I have witnessed Amazon ICE vans choke out a gas station daily near an Amazon hub. But never have I seen a Rivian at a public EV dispenser. I'd wonder if the EDVs are owned by Amazon and leased back or if they are, as the ICE equivalent, owned and operated by 3rd party.

Amazon upside - vans to deliver packages and perhaps ROI - - - Perhaps. Still, they are delivery packages in EV mandate market areas, in volume. Amazon is expanding EDV deployments from Rivian. Just this week, I personally saw 80% of the Normal, IL drop lot full of EDVs where only about 20% were R1S/R1T. I was lurking to see what the California Dune might look like, disappointed).

VW upside - the ability to sell cars for the next decade - - - True 'dat!

 

[MarkNorman]

If I were a betting man, I’d put my money on VW owning a controlling stake of Rivian in the next 5 years. Of course, that will hinge on the success of R2 - that said VW could slap an ID.4 badge on the R2 and call it a day.

For all the EREV heads, I’ll politely point you to the Model Y being one of the best selling passenger vehicles in world for the past 2 years. Rivian could take a healthy chunk of that market share while Tesla flounders. No massive investment in EREV required.

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