VW will invest up to $5B into Rivian to form joint venture for next-gen EVs

by 9SIX
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Vw Will Invest Up To 5b Into Rivian To Form Joint Venture For Next Gen Evs

VW and Rivian have just announced that the two companies will form a joint venture, bringing Rivian’s software expertise to VW’s products and providing an initial $1 billion, and potentially up to an eventual $5 billion, in capital for Rivian to get through its push to deliver its upcoming R2 vehicle.

Rivian is currently working hard to get costs down in its quest for profitability. While the company has large cash reserves, it’s running through them at relatively rapid rate. The financials get a little bit better each quarter, but there is still a lot of work to be done.

Recently, Rivian announced that it would delay building its plant in Georgia in order to save over $2 billion in the short term, helping reduce pressure on its near-term financials.

Now, today, the company has had another pressure valve released, as VW and Rivian have announced they will form a joint venture to bring Rivian’s software to VW’s EVs, with VW offering an initial $1 billion in capital and potentially up to $5 billion by 2026.

“Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost. We are also acting in the best interest of our strong brands, which will inspire with their iconic products. The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness.”

OLIVER BLUME, CEO OF VOLKSWAGEN GROUP

The partnership is valuable for VW as well, as software has been its biggest issue recently. VW’s previous CEO, Herbert Diess, stepped down in 2022, and it’s thought that software issues were the main reason for his departure. In 2023, VW hired a former Rivian exec to help with software. It must have liked what it got, as the companies are deepening their relationship now.

The partnership begins with VW offering a $1 billion convertible note to Rivian, which will convert into an equity holding around the end of this year.

In addition, the two companies will establish a 50/50 joint venture around “next generation electrical/electronic architecture.” This will give VW immediate access to Rivian’s electronics architecture, which has been seen as one of the major strengths of the company.

“We’re very excited to be partnering with Volkswagen Group. Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it’s exciting that one of the world’s largest and most respected automotive companies has recognized this. Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth. Rivian was created to help the world to transition away from fossil fuels through compelling products and services, and this partnership is beautifully aligned with that mission.”

RJ SCARINGE, FOUNDER AND CEO OF RIVIAN

After the establishment of this joint venture, VW says it will invest an additional $4 billion into Rivian, in $1 billion tranches in 2025 and 2026, contingent on Rivian meeting “certain milestones.”

After the announcement, RIVN stock is trading up more than 40% in after hours trading. It had already risen 8% during today’s trading session after an analyst upgrade. Rivian will hold an investor call at 3pm Pacific, 6pm eastern here, and you can read its investor letter here.

Source: electrek

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