Volkswagen Ups Rivian Stake to $5.8 Billion Sparking Stock Surge and EV Innovation
1min read Volkswagen Group has announced an increase in its investment in American automotive manufacturer Rivian, boosting its commitment by 16% to a significant $5.8 billion. This expanded investment underscores both companies' strategic plans to jointly develop electric vehicle architectures and software, setting the stage for their ambitious collaboration.
The announcement of this enhanced partnership between Volkswagen and Rivian sent the latter's stock soaring by nearly 9% in after-hours trading on Tuesday. In June, the companies revealed Volkswagen’s initial $5 billion investment, offering a crucial financial lifeline to Rivian, an electric vehicle startup facing high borrowing costs and a decline in electric vehicle demand.
Rivian’s CEO, RJ Scaringe, emphasized the vital role of this cooperation and investment. He stated that the financial backing is crucial not only for launching the R2 SUV at their Normal, Illinois plant but also for ensuring its production and expansion at the Georgia facility, eventually leading to positive cash flow for the company.
Volkswagen's investment plan indicates a commitment of up to $5.8 billion by 2027, which includes a $1 billion initial convertible note. The German automaker intends to invest $1.3 billion in intellectual property licenses and equity, and up to $3.5 billion in future equity, notes, and debt acquisitions, contingent upon specific milestones being achieved.
Analysts have pointed out that the joint venture with Rivian might alleviate issues experienced by Volkswagen’s software division, Cariad, which has faced setbacks and financial losses since its inception. The partnership aims to harness Rivian's existing technology, with the first vehicle, the R2, expected to launch in 2026, followed by a possible Volkswagen model as early as 2027.
Leading the joint venture are Rivian's Chief Software Officer, Wassym Bensaid, and Volkswagen Group's Chief Technical Engineer, Carsten Helbing. The team will initially operate from Palo Alto, California, with three additional locations under development, striving to create a software-defined vehicle that can also be licensed to other automakers.
This collaboration is anticipated to expedite decision-making and development times, attributed to the agile nature of working with a smaller partner like Rivian. Moreover, Volkswagen's new Scout brand intends to leverage the technology developed through the Rivian-VW joint venture, highlighting the significant potential of this strategic partnership.
