By Abhirup Roy, Victoria Waldersee
SAN FRANCISCO/BERLIN (Reuters) – A few camouflaged Audis secretly arrived from Germany earlier this year at a factory of electric vehicle maker Rivian in California, where around 30 engineers dismantled the electronics and fitted them with harnesses and modules from the American startup.
Intense testing followed at the Palo Alto, California, facility. The tests focused on how the American startup’s architecture and software, which controls virtually every function, would work in German cars.
The mission: to see whether future electric vehicles from Audi parent Volkswagen could benefit from Rivian’s advanced technology, two people familiar with the matter told Reuters. A third confirmed that some Audis had been shipped to California.
As a result, Europe’s largest automaker announced Tuesday that it would invest up to $5 billion in Rivian after the two automakers agreed to a technology joint venture.
The closely guarded deal surprised the auto industry and investors. Details of how this happened have not been previously reported.
“I think it’s an accomplishment in itself that this hasn’t leaked, given the amount of work that’s already been done… and the number of people involved in our teams,” Rivian CEO RJ Scaringe told Reuters.
Rivian and Volkswagen sought to be “super secretive,” with the aim of “seeing if the electrical topology and everything would actually work and if they could pull it off,” one of the sources told Reuters.
The three sources asked not to be named because they were not authorized to provide these details to the media.
Volkswagen did not respond to requests for comment. A Rivian spokesperson said in an email that the company’s policy is “not to comment on the details of private internal updates.”
‘A SERIOUS CONVERSATION’
The deal is crucial for both companies.
For Rivian, known for its R1S SUV and R1T pickup, it provides the financial lifeline it needs to survive a sharp slowdown in demand for electric vehicles, build its cheaper R2 SUV and, it hopes, become profitable.
It could also help the company secure better deals from suppliers while sourcing components in larger volumes with the support of Volkswagen and its brands, including Audi, Porsche, Lamborghini and Bentley.
Rivian stock jumped 23% on Wednesday. On Thursday, it closed down 1.8% after the company estimated that electric vehicle deliveries for the June quarter would be lower than analysts forecast.
For Volkswagen, the deal brings low-cost, high-performance EV technology that traditional automakers have struggled to master.
Work at the group’s software unit, Cariad – created in 2020 with the idea of competing with similar capabilities at Tesla – has been marred by delays and losses partly due to slow decision-making by the group’s management.
The discussions that led to the dramatic tie-up began, Scaringe said, when he and Volkswagen CEO Oliver Blume met privately at Porsche’s experience center in Atlanta.
Two sources said the meeting took place in August last year.
“We delved deeper, discussed products and compared our views on the things we like,” Scaringe told reporters. “We immediately realized that we had common interests when it came to vehicles. This quickly led to a serious discussion about how we might consider working together. »
‘LONG WORK IN PROGRESS’
The companies immediately got to work, with a Rivian team visiting Volkswagen in Germany last fall.
Testing to make sure everything worked together was “like a scrum,” Scaringe said Wednesday at the company’s town hall, according to a source. Another trip to Germany followed earlier this year with lawyers and software experts, this person said.
Volkswagen, under Blume, who became CEO in 2022, was less “dogmatic” than before about what it should do itself and where it should seek external partners, told Reuters a fourth source.
To overcome the difficulty of integrating very different work cultures that often hamper these types of transactions, Volkswagen management agreed to rely on Rivian’s agility, Wassym Bensaid, head of software, told analysts Tuesday. He said “very clear rules and responsibilities” had been set for the joint venture.
His comments were intended to allay concerns among VW investors about whether the company’s traditional, more methodical approach to car manufacturing and contracting with multiple suppliers would conflict with Rivian’s agile software approach.
VW shares fell 2% on Wednesday. VW investors also worry that Volkswagen is spending more when its capital expenditures are already high compared to its peers.
Certainty of the deal came after Rivian conducted tests on Audis in Palo Alto, which arrived in the first quarter of the year, leading to financial negotiations over the past two months, a source said.
A fifth person close to Volkswagen said the companies still need to conduct comprehensive testing to ensure VW vehicles equipped with Rivian software can drive with full functionality.
“It’s not like we thought about this a month ago,” Scaringe told Reuters on Tuesday. “This has been a long work in progress.”
For Scaringe, who grew up a Porsche enthusiast and has restored classic 356s, it was a natural choice.
“To be able to see a Porsche on the road with our technology, I couldn’t be more excited,” he said.
(Reporting by Abhirup Roy in San Francisco and Victoria Waldersee in Berlin; additional reporting by Christina Amann in Berlin; editing by Sayantani Ghosh, William Mallard and Matthew Lewis)
