This Might Just Be Rivian’s Best Decision Yet
Rivian (NASDAQ: RIVN) has plenty of intriguing ambitions to keep investors on the hook. The company has product pipeline visibility with its upcoming R2, due to be launched in the first half of 2026, followed by the R3 and R3X — all of which will be more affordable than its R1 predecessors. Rivian also plans to sell the R2 overseas, fueling its global growth. The electric vehicle (EV) maker is planning to achieve positive gross profits for the fourth quarter, and for the full-year 2025.
But the one decision that might prove most valuable to Rivian and its investors over the long haul wasn’t mentioned: Its strategic decision to own its software, electrical architecture, and other key areas of the vehicle.
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While the vast majority of automakers, from ultra-luxury vehicle makers to hybrid manufacturers, sell their products entirely focused on the end consumer, Rivian understood the value of the technology it’s developing for its EVs.
It’s possible that Rivian could package some of its EV software technology and electrical nervous system to sell to other automakers. This could lead to joint ventures and/or partnerships, investment in Rivian from other automakers such as Volkswagen, or new revenue streams.
Speaking of Volkswagen — as it’s a perfect example — Rivian and Volkswagen officially launched their joint venture at an even larger value than originally anticipated. Their joint venture launched in a deal worth up to $5.8 billion to offer next-generation electrical architecture and vertically integrated software for both automakers’ EVs based on Rivian’s existing technology.
“The partnership with Rivian is the next logical step in our software strategy,” said Oliver Blume, CEO of Volkswagen Group, according to Automotive News. “With its implementation, we will strengthen our global competitive and technological position.”
Rivian believes it could eventually become the industry’s preferred partner for differentiated technologies, and its joint venture with Volkswagen essentially proves that’s a valid notion. From the get-go, Rivian has focused on vertically integrating key areas of the vehicle and its software, electrical hardware, propulsion, and autonomy. The latter two areas aren’t a part of the Volkswagen joint venture and remain fully Rivian-owned.
Here’s the kicker: Rivian’s software technology drawing this investment from Volkswagen essentially pays for its near future. In fact, the expected capital from Volkswagen in the partnership, plus Rivian’s cash and cash equivalents, are expected to provide enough capital to fund both operations through the R2’s launch and production ramp-up, and its midsize platform that will begin production in its upcoming Georgia plant.
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More broadly speaking, an increased focus on software development and digital automotive services will be a trend investors keep seeing. In fact, revenue from digital automotive services is likely to grow 25% annually through 2035, moving from $42 billion in 2023 to $610 billion in 2035, per a report by the Oliver Wyman Forum.
As vehicles continue to be loaded with more high-tech features, options, software, driver assistance technology, and digital automotive services, owning more of the technology in a vehicle could prove to be extremely valuable.
While Rivian has ambitions of vehicle deliveries overseas, with a handful of new model launches coming over the next couple of years, it’s clear that for now, Rivian’s most lucrative strategic decision was to own the technology that made Volkswagen come running. That decision should remain a part of Rivian’s investment thesis and will prove valuable as the company continues to evolve into a global EV maker.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
This Might Just Be Rivian’s Best Decision Yet was originally published by The Motley Fool
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