Volkswagen’s $5 Billion Rivian Deal Sparks Discontent at Cariad
The recent $5 billion deal between Volkswagen (VWAGY) and U.S. electric vehicle start-up Rivian Automotive (RIVN) has reportedly created tension within the German automaker’s software division, Cariad. This unexpected partnership, aimed at developing software for both companies’ future cars, has left many within Cariad feeling uncertain and disillusioned.
Key Takeaways:
- Cariad’s CEO, Peter Bosch, was excluded from the Rivian deal negotiations. This lack of involvement has fueled discontent and uncertainty among Cariad’s 6,000 employees.
- The Rivian deal comes at a time when Cariad is struggling with budget overruns and delays. These issues have hampered the rollout of key models, including Porsche’s first electric SUV.
- Volkswagen is facing declining demand and is considering factory closures in Germany. The company’s investment in Rivian, instead of focusing on internal software issues, has raised questions among workers about its strategic direction.
- Rivian sees the joint venture as a significant opportunity to boost production of its R2 SUV, scheduled for launch in 2026. They anticipate substantial benefits from the $5 billion investment, including cost savings and future revenue opportunities.
A Partnership with Uncertain Repercussions
The partnership between Volkswagen and Rivian, announced in June 2023, was intended to accelerate both companies’ development of software for their future electric vehicles. However, the deal has sparked controversy within Cariad, Volkswagen’s software division.
According to the Financial Times, Cariad’s CEO, Peter Bosch, was not included in the discussions leading to the agreement. This lack of transparency has led to frustration and uncertainty among Cariad employees, many of whom learned about the deal from news reports. One senior engineer expressed concerns about the deal’s impact on Cariad, stating that the current chaos surrounding the Rivian partnership hints at "more or less the end" of the company.
A Troubled Past
Cariad, founded in 2020, has faced significant challenges since its inception. Volkswagen has invested over $12 billion in developing in-house vehicle software, but the division has struggled with budget overruns and delays. These problems have directly impacted the rollout of key models, including the Porsche electric SUV.
While the company’s management has been criticized for its changing priorities and lack of direction, employees have also pointed to a disconnect between the priorities of the engineering teams from Audi and Volkswagen, which were combined to form Cariad.
Volkswagen’s Uncertain Future
The Rivian deal adds to Volkswagen’s existing challenges. The German automaker is facing a decline in demand, and recent reports suggest the company is considering shutting down factories in Germany for the first time in its 87-year history. This dire situation has led to questioning among Volkswagen employees about the company’s decision to invest in an American startup over addressing the software issues within Cariad.
Despite the internal turmoil, Volkswagen has expressed its commitment to the Rivian partnership. The company sees the collaboration as a way to gain access to Rivian’s software expertise and accelerate its development of electric vehicle technologies. However, it remains unclear how the deal will impact Cariad’s long-term future.
Rivian’s Big Gains
Rivian, on the other hand, views the Volkswagen investment as a major boost to its growth plans. The company plans to use the $5 billion to ramp up production of its R2 SUV, scheduled for launch in the first half of 2026. Rivian’s CFO, Claire McDonough, has stated that the company expects "incremental benefits" from the deal, including cost savings and future revenue opportunities.
However, the Rivian deal also presents a significant risk for Volkswagen. If the partnership does not succeed, the investment will be seen as a costly mistake. The decision to proceed with the deal in the face of declining demand and internal turmoil within Cariad raises questions about Volkswagen’s long-term strategic direction. The impact of the Rivian deal on both companies, and their respective software divisions, remains to be seen.
