The question I can’t seem to answer is: Does VW need Rivian more or vice versa? The best partnerships are made when strengths are combined, but short of that there’s a lot to be said about combining weaknesses. Volkswagen’s CEO got clocked talking about working with Rivian more and it sure sounds like the two companies will be, uh, collaborative to say the least.
It’s all about pairing up on this Friday installment of The Morning Dump. Will Honda/Nissan/Mitsubishi be collaborative? Sure, but there’s a fourth brand poking into this impending thruple and, while the French might be ok with that, it’s a bit much for these Japanese carmakers.
And, while we’re talking about sharing, the FTC is using federal garbage time to stop GM’s OnStar from sharing your data with credit monitoring agencies. Woohoo! It’s Friday and the streets of New York are slightly less busy than they were as congestion pricing seems to kinda be working.
Rivian And VW Are Super Into Module Swapping
I already mentioned this week that one of the big weaknesses of cars made by traditional automakers is that, rather than use a high-speed modem and a small number of computers/modules to run in-car systems using a unified code, they instead farm these systems out to suppliers. This means that a Ford might have 150 separate systems to control everything from the seats to the suspension, whereas an EV from a startup might have fewer than 10. Volkswagen says it needs about 100 modules, whereas Rivian only needs seven to do the same job.
This is a weakness and it’s something that traditional automakers know they need to fix. Ford is outsourcing the development of its next-gen EV platform to a Skunkworks team. Volkswagen, though, is going in a different direction.
A quick history lesson. Volkswagen, post-Dieselgate, understood the problem and completely whiffed on the solution. The company thought it could toss literally thousands of engineers at its software woes via its Cariad subsidiary. This was the wrong way to approach the issue and cost Volkswagen billions of dollars, the results of which were… I’m not sure. When Oliver Blume got called up from heading Porsche to heading all of Volkswagen his early target was Cariad and its mediocre performance.
Rather than try to reform Cariad, VW decided to give Rivian $5 billion in exchange for software help. It was an admission of defeat as much as it was a strategic move. At the same time, Rivian needed the money. The company has already slowed down on its plan to build cars in Georgia, instead shifting more production to its existing Illinois factory. This year, Rivian was still losing, basically, a Honda Accord on every truck sold.
The cash came at a great time and, late last year, Volkswagen agreed to up the amount to $5.8 billion and form a joint venture called Rivian and Volkswagen Group Technologies (RVWGT). It was a little unclear how it would work, but VW CEO Blume let slip a preview of the future in an interview with Der Spiegel (Translated):
The Volkswagen Group wants to deepen its partnership with the US electric car start-up Rivian beyond an existing software cooperation. “For example, we are thinking about sharing modules and bundling purchasing volumes,” says CEO Oliver Blume to SPIEGEL. “The Volkswagen Group offers great opportunities for a small brand like Rivian.”
ORLY?
Given that Rivian had to cut its production forecast by 18% last year because of one small mistake when ordering from a supplier, perhaps a little help in bundling purchasing volumes isn’t the worst thing. Right? With VW’s Scout rolling out soon maybe they can save money on big tires, though Blume doesn’t see the two companies competing:
Blume rejects the idea that Volkswagen could be developing a Scout competitor with Rivian. “The vehicles are positioned completely differently,” says the VW boss. Scout’s pick-ups start at a base price of $45,000, Rivian’s at around $70,000.
There’s something bigger going on here than saving money. Every two months Blume keeps moving the target for cooperation and, to this point, I haven’t seen Rivian CEO R.J. Scaringe push back. With Rivian securing $6.6 billion from the Department of Energy to build out its Georgia facility, perhaps eventually Rivian won’t need VW’s help. It’ll be a long time before Rivian will start producing cars in Georgia and in the interim there are a lot of investments to make.
If you have an investment, share software, and start sharing parts… at what point are you not just the same company?
As they say, you eat an elephant one bite at a time, and Rivian is a pretty small elephant compared to Volkswagen.
Honda Would Like Renault Out Of The Picture
There is a comfort in conventional wisdom. You’re not going to get in that much trouble if you parrot what everyone else is saying, even if what everyone else is saying is wrong. Everyone was saying it! is an excuse people just accept.
The conventional wisdom is that the Honda-Nissan deal is bad news. It’s not going to work. Nissan is too weak and Honda is too strong. I disagree. The deal falling apart before it even happens is a completely reasonable outcome and it’s scary to say otherwise, largely because I sometimes feel like the only one saying I think it could be a good thing.
One barrier that still exists is Nissan’s ex, Renault, which is slowly winding down its large ownership stake in Nissan. That outsized stake was the price the Japanese automaker had to pay in order to be saved by the French one. Nissan, and the Japanese government, never really got over it.
Honda is committed so far to making the deal happen, but the rumored big ask from Honda to Nissan is that Nissan gets Renault out of the picture. Like Nissan, Honda has no real interest in being tied with a company that’s partially owned by the French state. Even worse, Honda is reportedly afraid that Renault will jettison its shares and screw up the whole deal.
Honda is concerned that Nissan could fall under an undesirable foreign influence should Renault’s stake be snapped up by a third party while negotiations to absorb Nissan are underway, Kyodo said Thursday, citing people familiar with the matter it didn’t identify.
There’s a catch! Nissan might not be able to afford to buy back those shares because, while it’s not broke, it’s certainly struggling. Here’s a crazy thought: Maybe Honda just buys those shares?
FTC To Ban GM From Sharing Your Data With Credit Agencies
I made friends with an Australian family who moved in nearby, and trying to justify why credit agencies even exist makes you sound like a crazy person. Explaining to someone that they need to go into debt to prove that they’re good with money is objectively nuts.
The Federal Trade Commission (FTC), under Lina Khan, has actively worked on behalf of consumers and, as a parting act, the FTC is making GM stop its policy of sharing driving data with credit reporting agencies.
Here’s what the FTC had to say about it:
“GM monitored and sold people’s precise geolocation data and driver behavior information, sometimes as often as every three seconds,” said FTC Chair Lina M. Khan. “With this action, the FTC is safeguarding Americans’ privacy and protecting people from unchecked surveillance.”
GM has offered OnStar as a service that will aid consumers during an emergency and provide hands-free voice assistance and real-time traffic and navigation. Over time, the company has increased the amount of data it collects through OnStar to include precise geolocation data—collected every three seconds for some users.
Tracking and collecting geolocation data can be extremely privacy invasive, revealing some of the most intimate details about a person’s life, such as whether they visited a hospital or other medical facility, and expose their daily routines.
This is good. GM already stopped the program, but this is making sure they don’t pick it up in a gentler regulatory environment.
Congestion Pricing Is Removing Personal Cars From The Streets
We’re now two weeks into congestion pricing in New York City and it seems to be working so far. Traffic is down about 8% overall and people are noting that it feels overall like a nicer experience traveling in the city. I took a commuter train into Manhattan and then took a subway further in, and the streets felt a little emptier and the trains felt a little busier. It was nice.
The question, though, is who exactly is behind this traffic reduction? Bloomberg did a camera analysis of cars and found that private car trips dropped while trips for Ubers and taxis increased.
Nearly all of the reduced vehicle entries to the congestion pricing zone appear to be due to personal vehicles no longer making the trip, according to Bloomberg’s analysis. The share of private cars traveling down Lexington Avenue dropped by six percentage points — from 40% to 34% of overall traffic — while the percentage of yellow cabs increased by seven percentage points. The share of Uber and Lyft and other commercial vehicles, like semi-trucks and delivery vans, remained largely unchanged.
“There was some concern in the environmental analysis that there would be diversion of commercial vehicles,” said Rachel Weinberger, Director of Research at Regional Plan Association. “But my suspicion is if you’re a commercial vehicle in the zone your destination is in the zone so you don’t have a diversion to make.”
This is as one would expect, said Charles Komanoff, a transport economist and New York City congestion pricing expert. Commercial vehicles pay the highest fees — up to $21.60 during peak hours — but those trips are essential to their business. For-hire vehicles pass the fees onto passengers, who may not change their behavior over 75 cents per trip ($1.50 per Uber ride), which is roughly equivalent to waiting at one extra traffic light. Passengers may even find they save money because their trips are shorter, Komanoff suggested.
It’ll take a long time to find out if this plan actually works, but getting people who could take the train out of cars while making it faster/nicer for pedestrians and people on bikes is a win. It’s also nice that your cab or Uber ride might be net cheaper because roads are clearer and traffic is reduced. Bloomberg tried to do an analysis of car value to determine if lower-income drivers were being impacted disproportionately and found no evidence of that yet, though it’s a bit of an extrapolation so I’m not sure if I entirely buy it.
What I’m Listening To While Writing TMD
It’s the last of the amazing trio of releases from The Roots, this time with “Thought @ Work” from Phrenology. Oh, and here’s my The Roots story. For some reason, in the early 2000s, it was quite reasonable to book The Roots to play your college. We did it at least twice while I was at UT Austin and the second time I remember that the band’s rider asked for a ton of fresh fruit and organic vodka. It was very specific about the type of vodka that The Roots would drink. We were a college and could not buy them fancy organic vodka. They were cool about it, though. We gave them a crap ton of fresh fruit in exchange.
The Big Question
What are the weirdest two auto brands in the same group in history?
Weirdest two brands in the same group? I feel like Citroen/DS and Ram are probably it and we’re living in it now.
Honestly, Volkswagen slapping a ‘Rabbit’ tag on the back of encheapened, fwd Rivian R3s wouldn’t be the worst thing.
Better yet tie it in to VW 80s history and call it the VW Golf Country
https://www.motorbiscuit.com/4×4-volkswagen-golf-country-ultimate-crossover/
You, me and like three other people know about the Golf Country.
About 5 people… yeah certainly you are directionally correct
I had to look it up to remember what VW called it 😉
I know these are big issues and everyone is running scared just waiting to find out what 1978fiatspyderfan has to say. No worries I am here to save you…
1. They say everything that is old is new again. Well it’s true. EVs and all cars are so expensive the only way EV manufacturers succeed is old school. One manufacturer for platforms, one for engines and everyone designs different bodies like before.
2. Honda, Nissan, Renault oh my. The group sex thing only works until 2 of the 3 partners decide the 3rd party isn’t an asset. Honda only needs to buy enough shares from Renault until Renault isn’t powerful enough then say we are doing it our way. And since Honda is way better at building cars I can only bet Renault dumps their remaining shares loses big time as Honda and smart investors scoop up the growth shares.
3. Stop allowing selling stolen data.
4. Am I the only intelligent person that realizes you remove a large segment of People from the toilet that is NYC you have removed customers and those taxes on big bucks sales are much more money than you get in congestion pricing.
For example I loved in Vermont and they have a shared border with New Hampshire. They raised cigarettes taxes to $2 a package. They said everyone would quit smoking and they would raise $20 million dollars in taxes. Now if everyone quits you lose all tax money. But what happened is everyone went to new Hampshire for cigarettes Vermont lost all the border tax money and no one quit smoking. That is what will happen in NYC the tourists will go elsewhere.
The tourists aren’t the ones driving, though – it’s the commuters choosing to drive when numerous, robust transit options are otherwise available. As someone else put it: if a minor fee like $9 is enough to deter you from making the trip, you probably didn’t need to do it.
Plus an 8% reduction of the normal NYC commuter traffic is only talking about tens of thousands of cars in a city of millions. Most of the big bucks purchases are done by people who can easily order delivery or take it home in a cab or train. The difference is that, being an island, and with most river crossings tolled as well, it’s not nearly as easily to escape to another area just to save a few bucks.
I agree that people changing transport modes does not mean removing “a large segment of people” and will make very little difference to businesses in NY, but 8% is pretty massive, and a much bigger percentage of the vehicles using/circling around looking for parking spaces.
True – I meant that 8% fewer people coming in isn’t that important when you have millions more people already there, who aren’t driving to the store.
Where did you come up with those crazy module numbers. The most I’ve found in a Ford are 40 and that is for a PHEV. The majority of the modules are running Ford software. They also all talk to each other, some that need it on a high speed bus while ancillaries use a medium speed bus, with some crossover of data through the gateway module.
Also Ford was one of the first to try combining modules starting that way back in the 2000’s with the LS, S-type, and Thunderbird where they reduced the module count significantly, that didn’t work out so great and they abandoned it.
> What are the weirdest two auto brands in the same group in history
RAM and Maserati is pretty weird.
“trying to justify why credit agencies even exist makes you sound like a crazy person. Explaining to someone that they need to go into debt to prove that they’re good with money is objectively nuts”
That’s because credit agencies aren’t about showing someone is “good with money”, they’re about showing someone is “good at paying borrowed money back in full, on time and with interest”. Whether what is purchased is a complete waste of money makes no difference.
Yes, however from the Aussie perspective… If you can show a constant and consistent saving, and have $100k saved by doing that. Surely that is better than paying off a $10k car, as you’ve done it on your own, without a bill to pay, or a threat of “we’ll take this from you if you don’t pay on time”. The fact it isn’t better, doesn’t make sense.
First, Rivian felt it was too good to work with Ford. Now, it’s hooking up with VW. What am I missing here?
Also, Honda doesn’t need Renault. Nobody needs Renault. Renault is a leech; it bleeds everybody it attaches itself to dry. Just ask AMC/Jeep and Mack Trucks. And the French government, which owns sizeable stakes in Renault and Stellantis/PSA, is just as bad (for protectionist reasons, among other things). Does Honda really need Prime Minister Macron and the rest of Parisian political wackos looking over their shoulders and telling them what to do? I hope not.
> First, Rivian felt it was too good to work with Ford. Now, it’s hooking up with VW. What am I missing here?
My guess is 1) ford is too much of a competitive threat 2) they have VW over a barrel given VW’s horrendous tech, so they were able to squeeze more money and other benefits out of VW per % of the company they’re giving up.
Tldr VW dumb
It was Ford who backed out of the deal with Rivian.
Oh TIL
Ford backed out of the deal. They were going to platform share some Lincoln models, but COVID scared them off.
That is the French for you. Ever since Degaulle sold out
Like the author wrote… ‘Rivian looses the price of a Honda Accord for every Rivian they sell”
So I’m sure Rivian is looking to make money anyway they can to get to profitability sooner. Hence why they are interested in inking deals with anyone they can to sell their EV or software or…. other received expertise.
Many small or smaller automotive companies have an engineering consulting business to help add value.
For decades: Porsche has had Porsche Design to sell other designed products and Porsche had consulted on many vehicular products, including HD on the vrod (they designed the engine heads), they’ve done the engineering for shared products with Audi and VW, like the 924 (which started as an Audi product), as well as the Cayenne/Q7/Toureque, partnered with Mercedes on the 500, designed sunglasses and other consumer products like bicycles…
Lotus also is famous for their engineering consulting work, especially around suspension design.
Apropos of nothing – but seemingly on topic – I saw an actual live Fisker Ocean on the road today.
I saw one a few days ago. in southern Indiana.
I’ve seen one—out of state tags on a major N-S interstate nearby
Regarding V-RIVIAN “there’s a lot to be said about combining weaknesses”
Two sick dogs don’t make a healthy dog.
IDK. They each bring something to the table. I feel like this is an overly negative take
Been through quite a few M&A’s and studied many others. That statement is a truism. Both companies have some serious issues at the moment. One may argue that neither is sick. I can accept it as being negative if I think they’re both a bit sick, but others don’t agree. It’s a free country, for the moment.
Can they help one another? Maybe. VW financially, Rivian with platforms and some much-needed un-boring innovation.
But VW, being the acquirer, will dictate culture, management, financial and product development processes. German financial management, for example, is dramatically different than US – I worked for Bosch for many years. Another reason why Daimler-Chrysler failed.
In an acquisition, the culture and processes of the buyer ALWAYS prevail, even when they intentionally buy something shiny and innovative in order to leverage it and internalize the good aspects of it. When things start to go a bit badly, the buyer will return to their safe place, which is ensuring that the acquisition is doing it their way. Then Rivian will be like VW. Is that a good thing?
Question – are they both a bit sick? That’s somewhat debatable. But if one agrees that they both are, it’s unlikely that a combo of the two will be successful.
We can revisit the “sick dogs” statement in 5 years. If I’m wrong, I’ll happily eat crow.
VW is M&A manifest, hence the “Group” part. Daimler needed nothing from Chrysler. Both VW and Rivian need things from each other. I’m not calling it a slam dunk, but you’re painting your own baggage all over this. If all M&As failed, then no one would go through with them. It’s honestly kind of a wild take to default to that thought process
I never said all M&A’s fail. They surely don’t. Perhaps that’s your own interpretation baggage?
I’ve been involved in financial and technology due diligence for a number of acquisitions. I’ve seen the good and the bad in those as well as others I’ve studied. It’s not fun when you see a freight train coming but the CEO or Chairman does not want to hear about it. Leaders sometimes get so excited about making a particular acquisition, that they intentionally fail to look deeply enough, or with rose colored glasses, ignore the red flags or input from others. It’s sort of like bidding for a car on eBay, or many Autopian car purchases, LOL. Successful acquisitions always come from doing adequate homework with clear eyes, and being perfectly willing to walk away.
If Daimler didn’t need or want something from Chrysler, then why make the acquisition? Of course they needed or wanted something, which was access to a larger market (and possibly Jeep). At the time of that acquisition, Daimler wasn’t a sick dog, but doing pretty well. They primarily wanted more scale. Inorganic growth. However, Daimler made a number of mistakes that led to a failed merger. Not the least of these was not understanding the massive differences between American and Germany styles of management and leadership. This is something business books warn about rather extensively.
Daimler wanted Jeep, and to a lesser extent trucks. That is why shortly after the acquisition they started attempting to sell the Dodge and Chrysler brands. When that didn’t generate any interest they sweetened the deal with Ram, which also didn’t gain any traction. It wasn’t until they decided to give up on Jeep that they were able to unload the whole mess on an unsuspecting LBO company.
A little late replying, but I have some interesting tidbits about the Daimler-Chrysler that rarely get mentioned. I get this via friends that dealt with Daimler engineers on a regular basis during the merger.
When the merger occurred, Daimler tasked a group of engineers, in a very German fashion, to literally look at every module and component used to build Chrysler’s cars. We are talking way over 10,000 components.
They then took the Chrysler widget and compared their widget for the same function and compared the components by tearing them both down. This is a very German way of thinking, it was an engineering challenge in their minds.
But what they discovered was even more interesting. More often than not, Part A from Chrysler often looked very similar externally to Part B from Daimler. During tear down they were actually the exact same part, built exactly the same. The only difference is the Bosch/Magna/”insert supplier name here” is they had different part numbers.
The most important thing was Daimler now knew exactly how much Chrysler paid for each part and how much they were paying for the internally identical part. One part was costing Daimler $30. Chrysler was paying $7 for the same part. This was a common module that Daimler was using in a lot of their cars. Easily hundreds of thousands (and maybe millions) of cars a year!
You are talking about savings of millions and millions of dollars a year just for one part. It sounded like they found hundreds and hundreds of parts with this significant price disparity.
Daimler purchasing approached the suppliers with the internally matching parts asking for them to explain the price differences (without disclosing initially they knew they were identical.) Apparently suppliers initially kept claiming the parts were built with superior materials, etc, etc, to justify the price differential. Seriously.
Needless to say Daimler told a lot of suppliers they were now going to sell their parts at the Chrysler price. The NPV of the savings was absolutely huge so Daimler most definitely benefitted quite a bit from the merger. Whether it offset the losses they incurred when they cut their losses is a longer discussion.
Great story. I had heard something similar from a friend on the inside of that, but with a bit less detail. Thanks for sharing!