VW to invest US$5b in EV maker Rivian, establishing joint venture
BERLIN: German auto giant Volkswagen (VW) will invest US$5 billion (RM23.5 billion) in US electric vehicle (EV) maker Rivian and create a joint venture expected to produce technology used by both automakers.
The collaboration includes a direct US$3 billion investment by the German company in Rivian as well as US$2 billion to establish an equally controlled and owned joint venture“to create nextgeneration electrical architecture and best-in-class software technology”, the companies said in a press release on Tuesday.
Shares of Rivian rose 8.6% on Tuesday and nearly 50% in after-hours trading following the deal’s announcement just after the end of the trading session.
Although praised for its technology, Rivian has been reporting losses and bleeding cash.
Under the transaction, VW will make an initial US$1 billion investment in the US company this year that will convert to Rivian common stock, to be followed by subsequent rounds in 2025 and 2026 of US$1 billion each.
The additional US$2 billion from VW is expected to be split between a payment at the start of the joint venture and a loan in 2026, the firms said.
Besides boosting Rivian’s balance sheet, the deal represents a vote of confidence by VW in the
California company’s platform that will improve the EV maker’s ability to win concessions from key suppliers, company officials said on a conference call with analysts.
“The transaction as a whole provides a powerful platform for future growth for Rivian,” said chief financial officer Claire McDonough.
“And it’s not just the US$2 billion of JV-related capital. It’s the full US$5 billion of capital and the opportunity we have to accelerate our mission.”
VW’s investment will enable Rivian to fund investments to ramp up production at its Illinois factory and to advance a new plant in the state of Georgia, the company said.
Those two projects enable “a path to positive free cash flow and meaningful scale”, Rivian said.
The venture will allow VW to employ Rivian’s existing electrical architecture and software plan, accelerating the German company’s efforts on software-defined vehicles.
“Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost,” said VW chief executive Oliver Blume.
“We are strengthening our technology profile and our competitiveness.”
The two companies expect completion of the transaction in the fourth quarter of this year with anticipated regulatory approvals.