Rivian Automotive (RIVN +2.09%) and Volkswagen's joint venture, known as RV Tech, was really a win for both sides. On one side, Rivian gained not only credibility for its software stack, but it gained a backer and partner with scale and deep pockets. On the other side, Volkswagen gained a technology partner and electrical software stack that the automaker needs to compete with Tesla and Chinese automakers. The good news for investors is that this partnership might be more lucrative than initially imagined!
Opportunity knocks
In a sense, Rivian and Volkswagen developing an electrical software stack that could solve a problem for many in the automotive industry opens up an opportunity for the joint venture to license its technology to third parties. Indeed, Rivian and VW have ambitions of selling this electric vehicle (EV) technology to other automakers in the future as the platform is designed to be scalable across vehicle sizes and segments in Western markets.
Image source: Getty Images.
Rivian received a big credibility boost with Volkswagen's backing, and the latter placed a sizable bet on Rivian being the right partner to solve software problems as the company is already facing problems with tariffs in the U.S., declining sales in a difficult Chinese market, and stagnant demand in Europe. Already the two partners are working on zonal architecture that will use fewer individual controllers to oversee functions and will reduce costs.
Further, there is some precedence for this move as Volkswagen has licensed its technology to automakers in the past. In fact, Ford Motor Company (F +1.01%) was one automaker to use Volkswagen's first-generation platform for its EVs. It's not uncommon for automakers to pair together for projects or platforms; Ford even had an agreement to work with Rivian on a vehicle platform many years ago before scrapping the idea.
Another intriguing takeaway is that this technology might not solely be used in EVs. In fact, while RV Tech is prioritizing the design and delivery of the platform for EVs, there are parallels that enable the technology to be used for combustion-engine vehicles also. That opens the door much wider for Rivian's use not only in VW's product lineup, but also for third parties that primarily manufacture combustion engine products.
Already paying off
For Rivian investors, the joint venture is already paying dividends and helped drive its financials with a gross profit surprise. That gross profit surprise drove investors to the stock and sent it soaring as much as 36% higher over the past month before it gave up much of those gains. But here's a closer look at how the joint venture powered its gross profit result.
NASDAQ: RIVN
Key Data Points
Rivian's consolidated gross profit breaks down into two parts: automotive, and services and software. Rivian's automotive gross profit was negative 130 million for the third quarter, which was significantly better than the prior year's negative 379 million. But software and services, thanks to the joint venture, generated $154 million gross profit. That was enough to offset the automotive loss and produce a positive $24 million gross profit for the third quarter overall.
Another reason this is a sizable gamble is that the first vehicle to receive the technology will be Rivian's highly anticipated and critical R2, which launches in the first half of next year. As new vehicle prices hover around $50,000, Rivian's R2 with a price tag of $45,000 should hit the right spot to really accelerate deliveries and broaden the company's total addressable market.
Ultimately, for investors, this is a fantastic development for Rivian as it's backed by a global automaker with immense scale and deep pockets. It's also developing technology to use in its vital R2 crossover, and could potentially license this technology to other automakers needing electrical software technology, which could open the doors to high-margin business. Rivian is a high-risk, high-reward investment, and it should be a small position of any portfolio, but it appears well positioned for 2026.
