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Tuesday, August 27, 2024

Reposting: The VW-Rivian Deal -- August 27, 2024

Locator: 48462EVS.

Locator: 48041EVS. 

Reposting
Updates

August 27, 2024, in The Atlantic, July 8, 2024:

From the linked article:

Volkswagen is partnering with Rivian not because it wants access to the company’s manufacturing expertise or even its EV technology. It’s doing so because it wants access to Rivian’s software. What this deal represents is an admission by Volkswagen that it needs help, and that its attempt to go it alone with EVs has stalled. But that’s progress. As they say, the first step to solving a problem is admitting that you have one.

On the face of it, the deal may look almost like an act of charity by Volkswagen. VW is investing $1 billion up front in Rivian itself, another $1 billion later this year in the joint venture (which will focus on developing software and electronics for EVs), and a further $2 billion if certain financial goals are met, plus an additional $1 billion loan to Rivian down the line. The EV maker, meanwhile, isn’t putting up any cash; all it’s contributing is its knowledge and intellectual property.This is unquestionably a good deal for Rivian, because it’s getting what it most needs right now: money. 

Running a car company is very expensive, especially in the early stages when the company needs billions in plant and equipment, and it has no economies of scale because it isn’t making that many vehicles. (Rivian is supposed to sell 57,000 of its models this year. Volkswagen, in contrast, delivered more than 9 million vehicles worldwide last year.) Even though Rivian’s SUV and pickup truck have gotten glowing reviews and are very popular among high-end car buyers, the company is still losing more than $38,000 per vehicle. So VW’s billions will come in handy, which is why Rivian’s stock—which had been bumping along at about 10 percent of its 2021 IPO price—jumped 50 percent when the deal was announced.

What’s interesting, though, is that this could turn out to be an even better deal for Volkswagen. That’s because it could solve one of the biggest problems VW has faced in recent years: making software for its electric vehicles that actually works. When VW rolled out its ID.3 model, which was supposed to be its flagship electric sedan, the vehicle’s software was glitchy, the touch screen was unreliable, and some drivers complained that the traffic-detection technology was so erratic that their cars were braking suddenly for no reason.

Even more frustrating for owners, VW was unable to consistently update the software wirelessly in real time, something Tesla has been doing for years. At one point, ID owners had to drop their car off at the dealer to get a hardware update that was supposed to improve the software updates—an unofficial recall, in effect. Software problems also led to delays in the release of the ID.4 and actual recalls after its launch, as well as coding issues with vehicles from VW’s luxury brands Audi and Porsche.

Original Post 

Today [June 26, 2024], one day after the deal was announced: the Rivian deal starts to make more sense; speaks volumes about what's going on in Germany; spoiler alert: not much -

  • the deal likely saved Rivian; The WSJ calls the cash infusion a "lifeline."
    • Rivian is burning through $1 billion / month
    • had $9 billion in cash before deal announced
    • VW cash infusion: simply buys five more months at current cash burn
  • production absolutely flat
  • but the big story -- VW needs an American EV company; can't make EVs profitably in Germany; energy costs too high; US now exporting more “energy” than it consumes — EIA.
  • VW shareholders not happy: Volkswagen down 2%;

Barron's: link here. Be sure to read comments at the article.


From yesterday, June 25, 2024, the day the deal was announced:

Later, 3:18 p.m. CDT: Volkswagen thinks different. Just announced. VW takes a $1 billion stake in Rivian. For the moment, the cash infusion likely saves Rivian from an alternative outcome. I have no idea what VW gains from this deal. It's not as if Rivian is doing something VW can't do, and it's not as if Rivian has a global dealer network selling EVs. My hunch: VW needs Rivian to meet California EV standards due to go into effect in 2035 or thereabouts. Sort of like buying forest land to pay for carbon credits. Rivian is nowhere near making a profit, according to Phil Lebeau, June 25, 2024.

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Indoor Plant Update

Two new huge leaves starting to unfold -- one on each of two large-leaf plants.


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