Automakers are looking to carve out their own corners in the automotive space in response to the push to transition to electric vehicles and industry demand for new vehicle software.
Collaboration with larger or more tech-savvy companies is one strategy that a few locally based manufacturers are using to take the lead in the development of future vehicle models.
These partnerships, in turn, benefit the companies looking to work with the likes of Rivian Automotive Inc. (Nasdaq: RIVN) and Hyundai Motor Co.
Legacy original equipment manufacturers (OEM) have been facing challenges in developing technology for software-defined vehicles, according to Baird analyst Luke Junk.
Junk notes that larger manufacturers need help and support in this area which local suppliers can provide.
He also states that more “tie-ups” between legacy OEMs and younger startups or international manufacturers could affect “how Western automaker cultures and hierarchies mesh.”
Junk ultimately pointed to an “increased sense of urgency” that will occur among both players no matter what.
Hyundai to Evaluate Future Projects with General Motors
Hyundai Motor Co., with its North American division based in Fountain Valley, is looking to reduce costs and build a wider range of vehicles via a collaboration with global automaker General Motors (NYSE: GM).
The two manufacturers signed an agreement in September to immediately start working together on manufacturing and producing electric and hydrogen technologies.
“This partnership will enable Hyundai Motor and GM to evaluate opportunities to enhance competitiveness in key markets and vehicle segments, as well as drive cost efficiencies and provide stronger customer value through our combined expertise and innovative technologies,” Executive Chair Euisun Chung said.
The in-house legal team of Hyundai Motor North America worked on the venture for several months and are now helping the automakers find the right projects, according to Chief Legal Officer Jason Erb.
Building From the Ground Up
In June, Rivian Automotive Inc. (Nasdaq: RIVN) formed a joint venture with Volkswagen Group to create software-defined vehicle platforms that use the Irvine EV maker’s electrical architecture and software technology for both companies’ future lines of electric vehicles.
The project, which will be equally controlled and owned, is scheduled to begin in the current quarter. Two executives will lead as co-CEOs with Rivian to appoint technical leadership while Volkswagen will appoint the joint venture’s chief operating officer.
It also includes a $5 billion investment from Volkswagen, one of the world’s largest auto manufacturers.
An initial $1 billion will be given through an unsecured convertible note that will convert into Rivian’s common stock by December with another $2 billion in common stock to be added over the next two years.
The remaining $2 billion will be split between a payment at the inception of the JV and a loan available in 2026.
Rivian’s upcoming R2 vehicle will be the lead program for the venture while any Volkswagen vehicles that result from the partnership won’t be seen until the second half of the decade, according to Rivian’s Chief Software Officer Wassym Bensaid.
The companies also said the collaboration will help lower the production cost per vehicle while Volkswagen’s global reach will help Rivian target more customers.
Baird analyst Luke Junk expects the venture “to ultimately spur additional action in the industry, which should help to address lingering questions around the role of auto suppliers in this transition.”
The ability to build the necessary technology from scratch is Rivian’s key advantage, founder and Chief Executive RJ Scaringe said during the company’s first-ever Investor Day in June.
“I designed the company from the ground up to be incredibly strong and very deep in this space of electronics and software,” Scaringe told analysts.
Karma’s Turn to IT Industry
Irvine-based Karma Automotive, currently led by President Marques McCammon, signed a memorandum of understanding with tech firm Intel in August to co-develop software-defined vehicle architecture (SDVA) for Karma’s upcoming vehicle lineup.
The luxury EV maker’s incoming super coupe model, the Kaveya set to arrive in 2026, will be the first vehicle to utilize the technology.
McCammon said the information technology (IT) industry will help create a more supportive and energy-saving computing system that can better handle multiple functions.
By applying concepts created for the PC industry, Intel can “yield substantial power savings at the vehicle level, which can ultimately solve the challenge of building a more sustainable long-term global EV supply chain,” Jack Weast, the general manager of Intel’s automotive arm, said in a statement.
Later, the companies plan to share the vehicle architecture they build with other manufacturers.
“For Tier 1’s and OEMs (original equipment manufacturers) not quite ready to take the leap from the old way of doing things to the new, Karma Automotive will play as an ally, helping them make that transition with business-to-business SDVA solutions,” McCammon said in a statement.
“We’re in a position to prepare the industry for the leap forward to SDVA without leaving anyone behind,” Weast added.
