VW and Rivian have just announced that the two companies will form a joint venture, bringing Rivian’s software expertise to VW’s products and providing an initial $1 billion, and potentially up to an eventual $5 billion, in capital for Rivian to get through its push to deliver its upcoming R2 vehicle.

Rivian is currently working hard to get costs down in its quest for profitability. While the company has large cash reserves, it’s running through them at relatively rapid rate. The financials get a little bit better each quarter, but there is still a lot of work to be done.

Recently, Rivian announced that it would delay building its plant in Georgia in order to save over $2 billion in the short term, helping reduce pressure on its near-term financials.

Now, today, the company has had another pressure valve released, as VW and Rivian have announced they will form a joint venture to bring Rivian’s software to VW’s EVs, with VW offering an initial $1 billion in capital and potentially up to $5 billion by 2026.

“Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost. We are also acting in the best interest of our strong brands, which will inspire with their iconic products. The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness.”

Oliver Blume, CEO of Volkswagen Group

The partnership is valuable for VW as well, as software has been its biggest issue recently. VW’s previous CEO, Herbert Diess, stepped down in 2022, and it’s thought that software issues were the main reason for his departure. In 2023, VW hired a former Rivian exec to help with software. It must have liked what it got, as the companies are deepening their relationship now.

The partnership begins with VW offering a $1 billion convertible note to Rivian, which will convert into an equity holding around the end of this year.

In addition, the two companies will establish a 50/50 joint venture around “next generation electrical/electronic architecture.” This will give VW immediate access to Rivian’s software architecture, which has been seen as one of the major strengths of the company.

“We’re very excited to be partnering with Volkswagen Group. Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it’s exciting that one of the world’s largest and most respected automotive companies has recognized this. Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth. Rivian was created to help the world to transition away from fossil fuels through compelling products and services, and this partnership is beautifully aligned with that mission.”

RJ Scaringe, Founder and CEO of Rivian

After the establishment of this joint venture, VW says it will invest an additional $4 billion into Rivian, in $1 billion tranches in 2025 and 2026, contingent on Rivian meeting “certain milestones.”

After the announcement, RIVN stock is trading up more than 40% in after hours trading. It had already risen 8% during today’s trading session after an analyst upgrade. Rivian will hold an investor call at 3pm Pacific, 6pm eastern here.

Electrek’s Take

This is great news for Rivian, and great news for VW as well.

However, Rivian has had a number of past partnerships that didn’t turn out.

Rivian had previously partnered with Ford to build Ford/Lincoln EVs and also with Mercedes to build electric vans. Both of those fell through, with the Mercedes deal including a joint venture and the Ford deal including a big investment which Ford later trimmed.

Rivian has also partnered with Amazon to deliver 100,000 delivery vans. That partnership is going well with over 10,000 vehicles delivered, but the exclusivity portion of the contract recently ran out, and now Rivian is looking for more purchasers.

In this case, though, I can see a direct reason for Voltswagen to need Rivian’s help. While their software is a lot better now than it used to be, software has been the achilles heel of traditional auto companies in general, and VW specifically. And with VW’s yearly revenue ($335 billion in 2023), they can spare a little change to fix one of their major problems.

One other interesting note: VW recently spun off its classic Scout brand into a Rivian-like adventure EV. That was seen as an attempt to compete in a market that Rivian is currently the best offering in. We wonder if this partnership will include using Rivian’s expertise for the Scout? Stay tuned.

After Rivian (RIVN) stock earned a big buy rating on Tuesday, shares traded up nearly 9% as investors look for the EV maker to break even. A new analyst sees at least 50% upside for Rivian’s stock price with a “credible path” to breakeven gross margins.

Rivian has a “credible path” to breakeven: Analyst

On Tuesday, Guggenheim analyst Ronald Jewsikow initiated a buy rating for Rivian stock, setting an $18 price target.

In a note to investors, Jewsikow said, “We see a credible path to breakeven gross margins” in Q4 2024.

The comments mirror those of Rivian’s CEO, RJ Scaringe. After a planned shutdown at its Normal, IL plant in April, Scaringe said the company “introduced a dramatic cost reduction in material costs.”

During a factory visit this week, Rivian told Reuters that upgrades earlier this year resulted in a 35% material cost reduction for its vans. The latest upgrades have savings of a “similar magnitude” for its R1S and R1T models.

Rivian has cut out 100 steps from the battery-making process, 52 pieces of equipment from the body shop, and over 500 parts from the design.

The path to profitability

Rivian’s gross vehicle margins have improved drastically over the years. After losing $139,277 for every vehicle built in Q3 2022, Rivian lost around $39,000 per EV in the first three months of 2024.

Although that number is down from the over $43,000 loss per vehicle in Q4 2023, it’s still up from the $32,600 and $30,500 loss in Q2 and Q3 2023, respectively.

Rivian is projecting its first positive gross profit in the fourth quarter of this year. Jewsikow sees Rivian’s recent plant upgrades and supplier negotiations as key to reaching positive gross profit.

After 2024, Jewskikow expects Rivian to generate positive EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2026 when Rivian launches its next-gen EVs.

Rivian revealed the smaller, more affordable R2 in March, which will start at $45,000. The R2 is expected to greatly expand Rivian’s market after it earned over 68,000 reservations in under 24 hours.

The R2 will be made in Normal, starting in early 2026. Although production was initially planned to begin at its new Georgia facility, the move saves $2.25 billion and will get R2 on the market quicker.

Rivian’s R2 is expected to account for 155,000 of the 215,000 future annual capacity at the plant.

Rivian stock was up nearly 9% on Tuesday following the news. Rivian’s shares are still down 43% in 2024 and 11% over the past 12 months.

Update: Rivian stock surges after hours following an announcement that Volkswagen will invest up to $5 billion into Rivian to form a joint venture for next-gen EVs

Source: Barrons

Five more wind turbines just came online at Vineyard Wind 1, making it the largest operating offshore wind farm in the US.

Vineyard Wind 1 expands

Sustainable energy company Avangrid and green investors Copenhagen Infrastructure Partners today announced that the Vineyard Wind 1 project is now delivering more than 136 megawatts (MW) to the electric grid in Massachusetts. (New York’s South Fork Wind, the US’s first complete utility-scale offshore wind farm, is 132 MW.)

In February 2024, Vineyard Wind delivered approximately 68 MW from five turbines to the grid. Vineyard Wind 1 now has 10 turbines in operation, enough to power 64,000 homes and businesses.

Each GE Haliade-X 13 MW turbine has a 220-meter (722-foot) rotor, 107-meter (351-foot) blades, and is 248 meters (814 feet) tall – roughly 2.7 times taller than the Statue of Liberty. Each is capable of providing power to more than 6,000 homes and businesses.

The project currently has 47 foundations and transition pieces installed, as well as 21 wind turbines, and the installation of the 22nd turbine is underway. Once completed, the project will consist of 62 wind turbines. Additional power will be delivered to the grid sequentially, with each turbine starting production once it completes the commissioning process.

Vineyard Wind 1, which is 15 miles off the coast of Martha’s Vineyard, will be New England’s largest renewable energy facility once fully operational, delivering 806 MW – enough clean electricity to power 400,000 homes and businesses. It began offshore construction in late 2022, achieved steel-in-the-water in June 2023, and completed the US’s first offshore substation in July 2023.

In July 2021, Vineyard Wind signed the first Project Labor Agreement for offshore wind in the US, which outlined the creation of 500 union jobs. By December 2023, Vineyard Wind 1 had doubled its commitment by creating 937 union jobs through two years of construction.

Electrek’s Take

Avangrid doesn’t say what the project’s expected completion date is in this latest announcement. The $3.5 billion project was originally expected to reach its full power potential by mid-2024, but I can’t see 52 more wind turbines coming online before the end of summer, but more certainly will. However, I expect this project will gain momentum now that the first turbines are online.

This offshore wind farm will prove to be a fantastic clean energy asset in the face of New England’s winter peak demand. 

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