Bugatti and Rimac: Blistering speedster and EV hypercar startup join forces ahead of a possible IPO

Looking to invest in a luxury performance carmaker like Ferrari but prefer a more environmentally friendly alternative?

Remember the name Rimac, the startup from Croatia behind the $2 million–plus zero-emission Nevera hypercar that has critics glowing.

Just 12 years after it was founded—in a garage, of course—the company (pronounced REE-mats) is now poised to take the next step. On Tuesday, it combined its auto business with Volkswagen Group’s Bugatti—until now run by VW’s Porsche brand—in a deal that gives it majority control over both luxury brands while helping the storied, century-old carmaker manage the transition away from combustion engines.

If the new Bugatti-Rimac joint venture successfully delivers over the next couple of years, Croatian parent Rimac Group could consider widening its own investor base by going public—and can already count on the backing of its second largest shareholder should it choose that route in the medium term.

“An IPO could make sense someday,” says Lutz Meschke, deputy CEO and head of finance at Porsche, in an interview with Fortune. “Rimac first needs to execute on its operational game plan, but in principle they can count on our support.”

The VW Group brand famous for the 911 sports car, Porsche owns a 24% stake in Rimac Group as well as 45% of the Rimac Bugatti joint venture. According to Meschke, his company aims to play a “strong supporting role” as minority owner of the Croatian parent. But that’s also where its ambitions end, he says: Interfering with Rimac’s ability to determine its own future would only end up hurting Porsche’s investment.

First task on the new joint venture’s agenda: develop a more ecologically friendly successor product for Bugatti, either as a plug-in hybrid or full electric vehicle. The 2017 Chiron gets barely more than 10 miles to the gallon while emitting five times the CO2 of an average car, owing to its eight-liter, 16-cylinder engine.

Analysts warn brands Ferrari, Lamborghini, and even Bugatti face a more challenging environment after a decade of high growth, since they have all been slow in addressing electrification.

“However irrelevant in the grand scheme of climate change, supercar [manufacturers] need to decarbonize their vehicles and neutralize their total carbon footprint, if only to maintain social acceptance,” Jefferies wrote in an Oct. 19 research note.

Rimac’s godfather

Meschke, who will sit on the board of the joint venture, has been referred to as the “godfather” behind the deal by the 33-year-old founder of the Croatian startup, Mate Rimac.

A graphic illustrating the shareholder structure of Rimac Group and Bugatti-Rimac.

That’s because while the Porsche CFO may be best known for delivering double-digit margins for parent Volkswagen Group during the worst of the global financial crisis and pandemic, he isn’t your usual bean counter.

Meschke is known to think strategically like a CEO, combing the global startup scene for partners in order to gain the expertise Porsche needs to shift toward software-enabled business models and clean, sustainable mobility. It was this groundwork that first established the connection to Rimac before landing the investment deal in 2018.

Initially the idea met with resistance from inside Porsche, yet Rimac is now poised to become a high-tech supplier to the German sports car brand.

“Our engineers always demand of themselves being the best in the industry, so there was a certain reluctance,” explained Meschke. “We were just starting to develop our Taycan full electric vehicle at the time, however, and quickly we discovered how much we can learn from each other.”

Impressing Porsche engineers isn’t easy, but Mate Rimac is something of an engineering prodigy—one who won a national championship in electronics and patented two inventions as a teenager.

Founder Mate Rimac next to the Nevera hypercar — Founder Mate Rimac alongside the Nevera hypercar.

Inspired by renowned Serbo-Croatian scientist Nikola Tesla, the young car enthusiast converted a 1984 BMW 3 Series sports sedan to run on batteries after blowing out its engine. He then decided to go into the auto business at the young age of 21, eventually leading to flattering parallels as Croatia’s very own Elon Musk.

Rimac also engineered the chassis underpinning for the Pininfarina Battista luxury sports car and retrofitted Prince Harry’s Jaguar E-Type to run on electricity. Besides his business supplying technical know-how and components to automakers, Rimac is currently in the middle of launching the Nevera, named after a Mediterranean storm.

For EVs meant to run at whisper-quiet decibels, thunder is probably not the best metaphor for a name, but the Nevera hypercar is lightning quick. Thanks to 1,914 horsepower, it can sprint to 60 miles an hour from a standstill in 1.85 seconds and finish a quarter mile in 8.6 seconds, both records for a series production road car.

That makes it an ideal owner of Bugatti, a brand revived in 1998 under former Volkswagen Group patriarch Ferdinand Piëch with the express task of redefining the limits of automotive engineering. The blistering speed of the original 2004 Veyron proved so great, Michelin initially struggled to equip the car with roadworthy tires to match its power.

By September 2019, however, Bugatti declared it was retiring from the business of chasing records after its Chiron breached the 300 mile per hour barrier, a first for a production car.

Under a new management team lead by Mate Rimac as CEO, Bugatti will remain an independent brand operating from its headquarters and production site in Molsheim, France. To save costs, engineering and development will be bundled together with Rimac’s Croatian base outside Zagreb.

“It’s taken months of preparations to carve Bugatti out of Volkswagen,” Meschke says. “Now we’re just excited to finally begin.”