Volkswagen and Rivian Are Teaming Up. What Does This Mean for Scout?

Rivian needs money and VW needs EV tech, especially as it heads into market with an electric off-road SUV.
Andrew P. Collins, assets from Rivian, VW, Scout Motors

Volkswagen, one of the oldest and biggest corporations to ever churn out cars, and Rivian, which has had two versions of one model in public for all of six years, are forming a new joint venture. As part of the deal, Volkswagen receives use of Rivian’s platform tech and Rivian receives a big ol’ check. With VW poised to launch its own Scout electric SUV brand in the near future, it’s likely that we’ll see some of Rivian’s concepts underpinning those vehicles.

It makes a lot of sense seeing as Rivian needs money and VW needs better electric cars. However, the arrangement is a little more complicated than one company buying another’s technology. As released by Rivian and VW AG:

“Initially Volkswagen Group will invest $1 billion in Rivian through an unsecured convertible note that will convert into Rivian’s common stock subject to certain conditions upon the later of receipt of regulatory approvals and December 1, 2024. Volkswagen Group is expected to invest a further $4B as part of the transaction.”

Asterisks from there lead you to:

“The conversion price of half of the outstanding amount under the note will be calculated based on a certain daily volume-weighted average price (VWAP) prior to this announcement and the conversion price for the remaining half will be calculated based on a certain daily VWAP prior to the conversion date.”

And:

“The additional investment of up to $2B in Rivian’s common stock is expected to take place through two tranches of $1B each in 2025 and 2026, with pricing based on a certain daily VWAP of Rivian’s common stock prior to each respective purchase. The investment of $2B related to the JV is expected to be split between a payment at the inception of the JV and a loan available in 2026.”

From where I’m sitting this looks like a huge win for Rivian. It should take some pressure off of their retail operations to bring in all the bacon that keeps the lights on at the R&D operation.

The exact phrasing used to introduce this partnership is that VW and Rivian “announced their intention to form an equally controlled and owned joint venture (JV) to create next-generation electrical architecture and best-in-class software technology.” The word “intention” tells us it’s not inked yet, but surely it’s gotta be close since they issued a press release.

The more interesting nugget is a little deeper: “Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade. In the short term, the joint venture is expected to enable Volkswagen Group to utilize Rivian’s existing electrical architecture and software platform. The partnership’s ambition is to accelerate Volkswagen Group’s SDV plans and transition to a pure zonal architecture. Each company will continue to separately operate their respective vehicle businesses.”

That zonal architecture being referenced is how Rivian organizes the computer systems controlling its vehicle. We talked about this in our recent Rivian R1S review. The company made a big deal about how much physical wiring and plastic parts it’s been able to remove from its cars by consolidating ECUs and functionality into “zones.” It must indeed be a feat if VW would rather buy it than figure it out alone.

Here’s what Rivian’s “zonal architecture” looks like. Rivian

The announcement states both Rivian and VW are hoping to launch new vehicles with this technology between 2025 and 2030. That could be referring to the Rivian R2, which is theoretically approaching a release along that timeline, and the new Scout, which is set to be revealed as soon as this summer.

Scout is, of course, an old nameplate from the ’60s and ’70s. The original Scouts were primitive SUVs made by International Harvester, the agricultural tractor company that had the foresight to market 4x4s as family cars. Unfortunately, they were a little too far ahead of their time in some ways and behind in others—Ford Broncos and Chevy Blazers were objectively superior and most moms and dads were still into station wagons. The last IH Scout was a 1980 model, but Volkswagen bought the brand name and is reviving it as an electric SUV we’re supposed to see any week now. (Late summer 2024 is the actual stated reveal date, on-sale timing is TBA).

Another interesting piece of context in this development is the fact that some folks working at Rivian have left to go to work at Scout somewhat recently. I know one myself but there’s no need to put them on blast, and there might not be anything to read into it. After all, it does make sense that a competitive employee at one EV outfit would also be desirable at another. Nevertheless, any indication of cross-pollination between Rivian and Scout is intriguing to me.

Which brings us to the first question I had when I saw Rivian and VW were teaming up: What does this mean for Scout? I dropped them a line, of course, but the official reply was simply: “We do not have a comment to share from Scout Motors at this time.”

My theory is that the overlords at VW AG decided a long time ago that its own EV platforms were not going to be competitive off-road against the Rivian, Hummer EV, and electric Mercedes G-Wagen in a cost-effective way. They must also know that the new Scout will be DOA if it doesn’t have some impressive performance because, despite my personal dreams, it surely won’t be cheap. The stakes for Scout’s launch are really high—the only “brand stans” are grumpy old heads like me who will be basically impossible to impress, and nobody else has heard of it. While Tesla can spraypaint a dumpster chrome and get people to spend six figures on it, Scout needs to come out swinging and offer a really compelling value proposition.

All this to say, it stands to reason that Scout is looking to bypass some debugging stages by leveraging the development work Rivian’s already done by organizing this deal. If it translates to lower consumer cost, I’m excited about it.