RIVIAN AND VOLKSWAGEN'S SECRET MEETINGS INVOLVED 'CLOAKED AUDIS' BEFORE DEAL: REPORT

Plus, legacy OEMs are creeping up on Tesla's sales and one-in-five public EV chargers are on the fritz.

Rivian's new joint venture with the Volkswagen Group—where the startup gets up to $5 billion and the German giant gets needed software help—has been an eye-opening moment. It helps to solidify the theory that new automotive startups can succeed more as software-based companies that build cars rather than the traditional automaker model. And Rivian's new zone-based architecture, the cornerstone of the Software-Defined Vehicle (SDV), could be the company's key to success. Now we know more about how this deal came to be. 

Welcome to Critical Materials, your daily roundup for all things EV and automotive tech. Today, we're chatting about what happened behind the curtain to form the Rivian and VW joint venture, legacy auto's impact on Tesla's sales, and how public charging is on the fritz. Let's jump in.

30%: Inside Rivian's Top Secret Meeting With VW That Sparked $5 Billion Partnership

Rivian CEO RJ Scaringe grew up as a "massive Porsche enthusiast." And last August, he found himself inside the Porsche Experience Center in Atlanta where he would meet privately with Volkswagen CEO Oliver Blume.

The two chatted about their companies, according to Reuters, outlining what interested them and eventually how the two companies could help one another out. Apparently, they hit it off. Shortly thereafter, work began to form the joint venture.

"We just went deep, talking product and comparing notes on the things we like," explained Scaringe. "There was [an] immediate realization that we have some shared vehicle interests. Quickly that led to a serious conversation as to how can we look at working together."

Rivian shipped a team of engineers to Germany later that fall to begin looking at just what the startup automaker could offer—and the focus was primarily the headache that is VW's software arm, CARIAD.

A few months later, a shipment of several "camouflaged" Audis were discretely shipped to a Rivian facility directly from Germany. A team of 30 engineers was then tasked with stripping down the car and retrofitting the mules with Rivian's harnesses and modules, a test of the new zonal architecture that will debut in the upcoming Rivian R2.

Here's what Reuters had to say about the testing and partnership formation:

The testing to make sure everything worked together was "like a scrimmage," Scaringe told a company townhall on Wednesday, according to one source. Another trip to Germany followed early this year with lawyers and software experts, this person said.

Volkswagen was less "dogmatic" than it had been previously under Blume about what it should do itself and where it should seek external partners, a fourth source told Reuters.

To overcome the difficulty of integrating starkly different work cultures that often plague such deals, Volkswagen leadership agreed to embrace Rivian's agility, its software chief Wassym Bensaid told analysts on Tuesday. He said "very clear rules and responsibilities" had been set for the JV.

His comments were aimed at alleviating VW investor concerns about whether the company's traditional, more methodical approach to automaking and multiple supplier contracts would clash with Rivian's nimble software approach.

The two companies were "super-secretive" about the plan, according to sources who spoke with Reuters and wished to stay anonymous. The engineers wanted to make sure they could pull off the seemingly impossible feat with little hurdles, and something must have worked correctly, because just months after the cars arrived, Rivian formally announced the $5 billion partnership.

Now, one thing that analysts really prodded for during Rivian's investor call was what Volkswagen is really bringing to the table—other than a huge pile of cash, that is. Scaringe danced around that question a bit, but did mention that VW would be bringing a plethora of different vehicle types, from entry-level to high-end, to test Rivian's architecture in.

The more valuable unspoken piece of the puzzle here might be validation that Rivian can be a true provider of zonal architecture. If Rivian is able to prove to the world that it can solve Volkswagen's problems, perhaps that makes the company even more valuable to the development of a true SDV. And that's where the money of tomorrow really could be.

60%: Legacy OEMs Are Putting A Hurt On Tesla's Sales

One of Tesla's biggest advantages was its early footing in the EV market. It helped to bolster the automaker's value and ultimately propel the company to the top of the global automotive ranks. But there's now a storm brewing that could shake up Tesla's stronghold on the EV market.

You see, legacy automakers are getting good at building electric cars. There's more competition on the market today than ever before, and even more on the horizon. And as Automotive News points out, the sales data is reflecting a clear consumer shift towards other options.

In 2023, Tesla captured around 60% of the EV market between January and April. Sales have been sliding, though, according to S&P Global Mobility. In the same period in 2024, Tesla's registrations fell around 11% and its share of the EV market slipped to around 50%.

Excluding Tesla from this April's registration data pool, EV registration rose by around 69%. This effort was led primarily by legacy auto brands like Ford (which sold 8,309 battery-electric vehicles, or a 169% increase in BEV vehicle registrations), Hyundai (a 75% gain with 6,355 vehicles sold), and Kia (a 172% rise with 5,340 vehicles.)

"A couple of years ago, we were all talking about how Tesla was the only EV brand doing well and everybody else was struggling. And now it's the reverse," said Tom Libby, S&P Global Mobility's associate director of industry analysis.

Automotive News says that data from Motor Intelligence points out that generous factory incentives was one of the biggest growth stimulators:

Toyota's bZ4X crossover had incentives of $10,963 per vehicle, compared with just $718 in April 2023, Motor Intelligence said. That helped lift the bZ4X to 4,666 registrations in April, compared with just 625 a year earlier, S&P Global Mobility said. The crossover is Toyota's only battery-electric model in the U.S.

April incentives for the Ford Mustang Mach-E electric crossover were about $9,000 versus $877 a year earlier, the data showed. Mach-E registrations nearly quadrupled year over year to 5,358.

Incentives for Nissan's Ariya crossover rose to $16,828 in April from $5,133 a year earlier, the data showed, and its registrations doubled to 1,556 in the same period.

Taking everything into consideration here, all signs are pointing towards a positive trend for the EV industry. Despite the overall adoption rate cooling off, a strong headwind is still pushing the EV take-rate forward, which is much needed to continue OEM, consumer, and government buy-in of the propulsion tech.

90%: One-In-Five Public EV Chargers Are Broken: Study

A new study championed by Harvard Business School says that public EV chargers in the U.S. have pretty crappy reliability. Yes, still. 

Bloomberg reports that the study—which takes into account a million reviews from EV owners left over a decade—shows that domestic charging stations have an average reliability score of around 78%. That means around one in five stations simply don't work.

Despite new EV chargers popping up every single day, the overall reliability remains low. Lead researcher Omar Asensio says this is simply because nobody is maintaining the stations once they're actually installed.

The data takes into account all public chargers, which includes both DC Fast Charging stations as well as privately owned, yet publicly accessible Level 2 stations. Problems with DCFCs might be addressed fairly quickly, as long as adequately trained staff and parts are available to repair the broken station, especially since they are owned by larger corporations with better reporting and monitoring capabilities. Level 2 chargers could take longer to be addressed, especially if the stations aren't a big money maker for the company that owns them.

To make matters worse, there's a lot that can go wrong during the charging process. Like a gas pump, there's a dispenser and a payment system (both of which can break), but charging stations often have more complex software in the mix.

And on top of that, the charging protocols aren't all that air-tight—it's not like dumping gas into a filler neck and waiting for it to fill up enough to trigger the automatic shutoff. The charger and car must both agree on how much electricity the car can receive, the speed it can transfer the electricity, and any other bumps along the way. E&E News describes many more of these failures in-depth.

There have been fewer failures in recent years though. In Q4 2024, a J.D. Power study showed that only 18% of public charging attempts failed, which is still dangerously close to the one-in-five figure, but better than the 22% recorded by Asensio. This indicates a bump in reliability, but still a problem as America rushes to pump out enough new chargers to meet growing infrastructure demands.

100%: Could Rivian Be The Next Tesla?

It turns out that building cars is actually pretty difficult. Tesla happened to succeed at it, but there were many other startup companies along the way that haven't exactly worked out. Recently, there's Fisker, but don't forget about Lordstown Motors. Hell, even Apple couldn't get its EV program off the ground. Fisker, however, seems to be headed in the right direction.

The company isn't—or wasn't, until the VW deal—flush with cash. This led to some questioning whether or not Rivian could actually last until the R2 and R3 were on the road. Now, it seems that Rivian has found another potential revenue stream: licensing its zonal architecture.

So, what say you, internet: is Rivian poised to become the next Tesla-esque success story, or is it too early to tell? Let me know in the comments.

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2024-06-27T14:38:13Z dg43tfdfdgfd