Berlin, Germany – Volkswagen shares took a hit as concerns arose over the implications and costs of a collaboration with American electric vehicle manufacturer Rivian. The joint venture, announced by the German automaker on Tuesday, involves an investment of up to $5 billion to bolster Volkswagen’s position in the electric vehicle market in Europe through sharing EV platforms and software.
Analysts have expressed unease over the impact of this deal on Volkswagen’s struggling software subsidiary, Cariad. The partnership with Rivian has raised questions about Volkswagen’s ability to independently develop software stacks, given Cariad’s history of delays and financial losses. This move comes as Volkswagen faces challenges in competing with agile electric vehicle rivals in the US and Asia, as well as in building the necessary software expertise for the industry’s evolution.
The investment has also sparked concerns about Volkswagen’s high capital spending and research and development costs, which have remained at 13% of auto revenues since 2018. Some analysts have suggested that investors would prefer Volkswagen to divest assets rather than make further acquisitions. Meanwhile, Cariad, once spearheaded by former Volkswagen CEO Herbert Diess, is undergoing restructuring efforts under new leadership to overcome setbacks and meet targets.
Despite the potential strategic benefits of the Rivian venture, doubts linger regarding the compatibility of Volkswagen’s and Rivian’s business cultures. Roger Atkins of consultancy Electric Vehicles Outlook Ltd highlighted the challenge of merging Rivian’s innovative software approach with Volkswagen’s more traditional supplier-based model. This cultural mismatch may pose obstacles in fully leveraging the joint venture for mutual success.
Both Volkswagen and Rivian aim to centralize responsibility and resources for software development within the joint venture, while Cariad will continue focusing on software for automated driving independently. The collaboration is expected to accelerate Volkswagen’s software development initiatives and drive cost efficiencies. However, the road ahead may require careful navigation to integrate differing organizational norms and strategies effectively.
The dynamics of this partnership have piqued investor interest and raised expectations for the future of Volkswagen’s electric vehicle ambitions. As the automotive industry undergoes a transformation towards electrification and software-driven solutions, the success of ventures like these will be closely watched. The outcome of Volkswagen’s collaboration with Rivian could potentially shape the company’s trajectory in the competitive landscape of electric vehicles.