Irvine-based Rivian Automotive got a big financial boost on Tuesday, as Volkswagen agreed to invest up to $5 billion in a joint venture with the struggling manufacturer of electric trucks. This Investment by Volkswagen in Rivian is part of a new, equally controlled joint venture to share EV architecture and software, as per the companies.
Under a partnership announced by Volkswagen and Rivian, the German automaker will provide $1 billion initially and as much as $4 billion more over time. The German automaker will also invest $2 billion in Rivian stock – $1 billion each in 2025 and 2026 – subject to the startup hitting certain milestones, and provide a $1 billion loan in 2026.
Volkswagen investment in Rivian
The infusion of $5 billion will give VW the ability to tap the company’s technology to develop “next generation” battery-powered vehicles and software. The surprise investment by Volkswagen comes during a tough time for the electric vehicle market, which has posed economic headwinds for Rivian and other EV makers.
Shares of Rivian surged about 50% in extended trade after the announcement, potentially supercharging the company’s market value by nearly $6 billion, if gains hold on Wednesday.
Effect of Volkswagen and Rivian partnership
The investment will provide Rivian the funding necessary to develop its less expensive and smaller R2 SUVs that are set to roll out in early 2026 and its planned R3 crossovers, CEO RJ Scaringe told Reuters. Moreover, the partnership will enable Rivian to cut operating costs by leveraging volumes of supplies including chips and components, he said.
It will also help Rivian, known for its flagship R1S SUVs and R1T pickups, turn cashflow positive. The company will license its existing intellectual property to the JV, and the R2 will be the first vehicle using software from the JV. Volkswagen vehicles, including its Audi, Porsche, Lamborghini and Bentley brands, will follow.
“Any cash infusion like that is huge. Getting the support of Volkswagen Group certainly really strengthens their story toward Europe and toward Asia eventually,” said Vitaly Golomb, managing partner at Mavka Capital, a Rivian investor.
Rivian’s financial loss
With their sleek design, Rivian trucks and sport utility vehicles initially drew plenty of interest among investors, fueling a massively successful IPO of stock in 2021. The company ended its first day of trading valued at nearly $88 billion. Amazon.com is Rivian’s largest shareholder.
But analysts said some car buyers were put off by the high price of Rivian’s latest offering of vehicles. Rivian’s R1T electric pickup truck starts at nearly $70,000, while its R1S SUV starts at almost $75,000.
Rivian reported a net loss of $1.52 billion for the three-month period that ended Dec. 31, compared with $1.72 billion during the same period a year earlier.
In March, Rivian postponed plans to build a new $5-billion manufacturing plant in Georgia to save money amid heavy losses.
A month earlier, Rivian announced a 10% cut to its workforce and lower production expectations.
Struggling EV market
The auto industry faces a crucial time as EV startups grapple with a slowdown in demand amid high interest rates and dwindling cash, while traditional automakers struggle to build battery-powered vehicles and advanced software.
Last week another local EV manufacturer Fisker Group Inc. of Manhattan Beach filed for Chapter 11 bankruptcy protection after it failed to secure financing from undisclosed automakers.
Early this year, Apple pulled the plug on its self-driving electric vehicle program, reportedly after spending $10 billion over a decade.
And Lucid Motors, a maker of luxury electric vehicles in the Bay Area city of Newark, received a $1-billion infusion last month from an affiliate of the Saudi sovereign wealth fund — the kind of big backer that Fisker didn’t have.
Rivian’s shares
Rivian stock has halved so far this year. Traders have bet heavily that the stock will fall, with an equivalent of 18% of its shares recently sold short. Rivian’s shares jumped 30% in extended trading on Tuesday. The shares closed at $11.96. While Volkswagen’s stock closed a bit higher at 106.55.
