FRANKFURT -- Volkswagen Group's Porsche brand said it will form a joint venture with Croatia's Rimac Automobili that will include VW's Bugatti brand, confirming plans mapped out earlier this year.
The venture will be called Bugatti-Rimac.
Rimac will own 55 percent, with Porsche owning the rest. The new entity will be established in the fourth quarter and based in Zagreb, Croatia.
VW Group will transfer Bugatti to the venture, Porsche said, adding that Rimac CEO Mate Rimac will lead the JV.
"We are combining Bugatti's strong expertise in the hypercar business with Rimac's tremendous innovative strength in the highly promising field of electric mobility," Porsche CEO and VW Group board member Oliver Blume said in a statement.
Two hypercar models will be produced by the joint venture: the Bugatti Chiron and the full-electric Rimac Nevera.
All Bugatti models will continue to be produced at the brand's factory in Molsheim, France, Porsche said.
Blume and Porsche finance chief Lutz Meschke will become members of the supervisory board of Bugatti-Rimac, which will have about 430 employees in Zagreb and Molsheim.
Porsche earlier this year raised its direct stake in Rimac to 24 percent in a deal that valued the electric hypercar maker, which is currently assessing strategic options, at 795 million euros ($943 million).
VW Group CEO Herbert Diess already said in March that Porsche would most likely form a JV with Rimac involving Bugatti and end up owning a minority stake.
Diess has stepped up efforts to focus funds on the VW, Audi and Porsche brands as VW Group embarked on the industry’s largest push into electric vehicles to challenge Tesla.
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 and the downsized initial public offering of a minority stake in truck unit Traton in 2019. Efforts to separate the Italian brands Ducati and Lamborghini gained little traction and were called off late last year.
'Very good profitability'
Bugatti has consistently generated positive results in recent years, Porsche's Blume told reporters in a webcast. The joint venture with Rimac is set up for yielding “very good profitability” that is appropriate a hypercar manufacturer, he said.
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, Kia and Chinese battery maker Camel Group.
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 are going to listen to the fan base and buyers and make products that make sense for the brand,” Rimac said.
Bloomberg contributed to this report