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Rivian and VW Group Forge Joint Venture for Advanced Vehicle Software Development and $5 Billion Strategic Investment

Irvine, California and Wolfsburg, Germany, June 25, 2024 — In a significant move set to revolutionize the electric vehicle (EV) industry, Rivian Automotive (NASDAQ: RIVN) and Volkswagen Group (XETRA: VOW / VWO3) have announced their intention to form an equally controlled joint venture to create cutting-edge software-defined vehicle (SDV) platforms for future electric vehicles.

Strategic Partnership Details

This groundbreaking partnership aims to expedite the development of advanced vehicle software for both companies, leveraging their complementary strengths to lower costs per vehicle and enhance global innovation. The collaboration is built on Rivian’s industry-leading zonal hardware design and integrated technology platform, expected to serve as the cornerstone for the new SDV technology.

Volkswagen Group plans an initial $1 billion investment in Rivian, with additional investments up to $4 billion, culminating in a total expected deal size of $5 billion. This strategic investment underscores the commitment of both companies to innovate and lead in the EV market.

Future Vision and Implementation

The joint venture is poised to enable both Rivian and Volkswagen Group to launch vehicles with the new technology by the latter half of this decade. In the short term, the partnership will allow Volkswagen Group to integrate Rivian’s existing electrical architecture and software platform into its vehicles, accelerating the transition to a pure zonal architecture. Despite the joint venture, both companies will continue to operate their respective vehicle businesses independently.

Executive Insights

Oliver Blume, CEO of Volkswagen Group, expressed his enthusiasm for the partnership, stating, “Our customers will benefit from this targeted partnership with Rivian to create a leading technology architecture. This cooperation allows us to bring the best solutions to our vehicles faster and at lower costs, reinforcing our strong brands with innovative products. This partnership aligns seamlessly with our existing software strategy, products, and partnerships, strengthening our technology profile and competitiveness.”

RJ Scaringe, Founder and CEO of Rivian, echoed this sentiment, saying, “We are thrilled to partner with Volkswagen Group. Since Rivian’s inception, we have focused on developing highly differentiated technology. It is exciting that one of the world’s largest and most respected automotive companies has recognized this. This partnership not only broadens the market reach of our software and zonal architecture through Volkswagen Group’s global presence but also secures our capital needs for substantial growth. Rivian was created to facilitate the world’s transition away from fossil fuels through compelling products and services, and this partnership beautifully aligns with our mission.”

Investment and Financial Details

The strategic partnership is supported by a $5 billion investment from Volkswagen Group into Rivian. The initial $1 billion investment will be through an unsecured convertible note, which will convert into Rivian’s common stock subject to certain conditions upon the later of regulatory approvals and December 1, 2024. An additional $4 billion investment is planned as part of the transaction, with specific terms and conditions laid out for future tranches in 2025 and 2026.

Extensive validation efforts over recent months have confirmed the compatibility of Rivian’s electrical architecture and software with Volkswagen Group’s vehicles. The completion of the joint venture formation is anticipated in the fourth quarter of 2024, subject to definitive agreements and regulatory approvals. Lazard is serving as the lead financial advisor, with BDT & MSD Partners acting as financial advisors to Rivian.

This partnership marks a significant step forward in the EV industry, combining the expertise of Rivian and Volkswagen Group to create a powerful synergy aimed at developing next-generation vehicle software. With a shared vision for innovation and sustainability, Rivian and Volkswagen Group are set to drive the future of electric vehicles, delivering advanced technology and enhancing the customer experience on a global scale.

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