Joint venture to produce Bugatti Chiron and electric Rimac Nevera

Volkswagen AG will fold its ultra-luxury Bugatti brand into a joint venture with Croatian electric supercar maker Rimac Automobili, extending a lifeline to the boutique French manufacturer known for hulking 16-cylinder engines, Bloomberg reports.

Rimac will hold a 55 percent stake in the joint venture with VW’s Porsche sports-car unit owning the remaining 45 percent, the companies said in a statement Monday.

Porsche earlier this year lifted its stake in Rimac to 24 percent.

VW Chief Executive Herbert Diess has stepped up efforts to focus funds on the German group’s namesake, Audi and Porsche brands as Europe’s biggest automaker embarked on the industry’s largest push into electric vehicles to challenge Tesla Inc.

While Rimac is closely held, it’s been fielding interest from special purpose acquisition companies.

VW started to review options for niche brands and non-core businesses five years ago, but results have been modest so far.

Bugatti’s shift to the joint venture with Rimac follows the sale of industrial gearbox maker Renk AG and the downsized initial public offering of a minority stake in truck unit Traton SE in 2019.

Efforts to separate the Italian brands Ducati and Lamborghini gained little traction and were called off late last year.

Bugatti has consistently generated positive results in recent years, Porsche CEO Oliver Blume told reporters in a webcast.

The joint venture with Rimac is set up for yielding “very good profitability” that’s appropriate a hypercar manufacturer, he said.

The Bugatti-Rimac venture is expected to be established in the fourth quarter, pending antitrust approvals.

The brands will initially produce the Bugatti Chiron and the all-electric Rimac Nevera.

As VW group’s smallest brand with annual sales of about 80 cars, Bugatti has long been viewed as a prime example of engineering extravagance. In 1998, it was revived under former Chairman Ferdinand Piech after largely fading from existence in the 1950s.

Because of high development costs and low volumes, the 16-cylinder Veyron — Bugatti’s first model under VW control — was considered one of the biggest money losers in the auto industry.

VW doesn’t break out financials for the division.

Bugatti’s new industrial partner was founded by Mate Rimac in 2009, with the company’s Concept_One electric supercar debuting two years later.

Apart from Porsche, investors in the company include Hyundai Motor Co., Kia Motors Corp. and Chinese battery maker Camel Group Co.

Mate Rimac said there will fully electric Bugattis in the medium term, but he also sees scope for the combustion engine sticking around “for some time” in hybrid vehicles.

“We’re going to listen to the fan base and buyers and make products that make sense for the brand,” Rimac said.

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