Inside Volkswagen and Rivian's big bet to rescue each other

The deal aims to address a core weakness for both companies: Volkswagen gets much-needed technology and Rivian gets much-needed cash

- Stephen Wilmot & Sean McLain

In August, a small team of Volkswagen executives and engineers flew from Germany to Palo Alto, Calif., to take a top-secret vehicle for a spin. Originally built as an electric Audi, the vehicle had been shipped to the U.S. startup Rivian Automotive earlier in the year in an experiment to see if it could fuse Silicon Valley tech prowess with German engineering. The Germans were impressed by what they found in California: a car that had been retrofitted so that the controls for everything from air conditioning to rear-axle steering could be updated wirelessly through a laptop.

VW, which is weighing potentially historic job and cost cuts as its business flags, had spent years and billions of dollars trying to build a digital-first car like this, and Rivian had produced a promising prototype in less than three months. "To get this up and running in the car within such a short time, even if you work day and night, this is really great," said Michael Steiner, VW's head of research and development, in a recent interview at the company headquarters in Wolfsburg.

Now the two companies are taking the partnership to the next level, in a deal that aims to address a core weakness for each: VW gets much-needed technology and Rivian gets much-needed cash.

According to terms completed this week, VW will invest up to $5.8 billion in Rivian stock and a joint venture—up from a $5 billion deal value envisaged when the collaboration was announced in June. In return, the German company gets access to a blend of onboard computing and software that Rivian spent billions of dollars to develop for its own vehicles.