The new venture will be “equally controlled and owned” and aims to develop “next generation” battery-powered vehicles and software, VW and Rivian said. — Bloomberg
NEW YORK: Volkswagen AG (VW) will invest US$5bil to form a joint venture with electric vehicle (EV) maker Rivian Automotive Inc, throwing a lifeline to the struggling startup and giving the German automaker access to the American EV company’s technology.
VW said in a release that it will invest US$1bil immediately in Rivian and an additional US$4bil over time. The new venture will be “equally controlled and owned” and aims to develop “next generation” battery-powered vehicles and software, VW and Rivian said in a joint statement.
Rivian’s shares surged following the announcement, gaining more than 50% in aftermarket trading. The stock had fallen 49% this year through Tuesday’s close.
The strategic tie-up provides Rivian with a much-needed source of fresh capital after the company struggled to ramp up production and deliveries of its electric pickup and SUV models.
Volkswagen plans to take an initial US$1bil equity stake in Rivian through an unsecured convertible note that will exchange into Rivian shares on or after Dec 1, according to the statement.
Amazon.com Inc is Rivian’s largest shareholder with a 16% stake valued at nearly US$2bil at the time of writing.
The pact then calls for VW to invest an additional US$2bil in Rivian shares via two equal tranches in 2025 and 2026.
The German automaker also intends to put US$2bil into the joint venture through a payment at the venture’s inception and a loan available in 2026, according to the statement.
On a conference call, Rivian chief executive officer (CEO) RJ Scaringe said he and VW CEO Oliver Blume, shared an “immediate realisation” the two were aligned on product strategy soon after they initially met. That led to conversations about working together, he said.
“Through our cooperation, we will bring the best solutions to our vehicles faster and at a lower cost,” Blume said.
“And we are strengthening our technology profile and our competitiveness.”
Rivian went public in November 2021 at the peak of enthusiasm for the speedy arrival of the EV future, seen as a potentially formidable competitor to EV market leader Tesla Inc.
An early rise in Rivian shares briefly gave it a market value exceeding that of Ford Motor Co and General Motors Co.
Since then, many of its fellow EV startups have fallen by the wayside as mainstream car buyers turned away from pricey EVs.
Rivian has struggled to find a path to profitability and generate enough cash flow to fund its future.
Rivian has seen attempted partnerships with established automakers collapse before.
In November 2021, it abandoned plans to jointly develop EVs with Ford Motor Co, an early investor. And in December 2022, it shelved a deal to build electric vans with Mercedes-Benz AG.
For VW, the German automotive giant gets access to the EV startup’s software and EV architecture after years struggling to roll out plug-in vehicles with efficiency and functionality on par with those from Tesla Inc.
Both companies plan to introduce vehicles featuring technology created by the joint venture in the second half of this decade, according to the companies’ joint statement. — Bloomberg
