Volkswagen, the esteemed German automaker, made a significant announcement on Tuesday. They have chosen to invest a substantial amount, up to $5 billion, in Rivian, a company that specializes in electric trucks. This partnership seeks to enhance cooperation on software development for electric vehicles.
At first, Volkswagen will invest $1 billion into Rivian, with intentions to potentially increase this amount to as much as $5 billion in the future. Subject to regulatory approval, Volkswagen is poised to become a major shareholder in Rivian. This significant investment demonstrates a clear show of support for Rivian, despite the company’s ongoing difficulties, including substantial financial losses on each vehicle sold.
The partnership between Volkswagen, a major player in the automotive industry, and Rivian, an emerging electric vehicle start-up, is both unique and full of potential. It fills important voids for both parties involved. Volkswagen acquires the much-needed software expertise, while Rivian secures essential funding and gains from Volkswagen’s extensive manufacturing knowledge. Volkswagen is known for producing nearly 10 million vehicles annually, making it the second-largest global market player, just behind Toyota Motor.
Rivian’s vehicles, including pickups and sport utility vehicles, have garnered high praise from automotive critics. Nevertheless, the company has encountered challenges in expanding production at its facility in Normal, Illinois. Investor worries have escalated lately, as there are concerns that Rivian may not achieve profitability in the near future.
R.J. Scaringe, the founder and CEO of Rivian, emphasized the importance of Volkswagen’s financial backing. The funds will help support the launch of the R2, a midsize SUV with a price tag of approximately $45,000, as well as the completion of a new factory in Georgia. Rivian temporarily halted construction on its Georgia plant in March, resulting in significant cost savings of over $2 billion.
“This is absolutely vital for us from a financial standpoint,” Mr. Scaringe stressed during a conference call with reporters on Tuesday.
Rivian offers the R1T pickup, which has a starting price of approximately $70,000, and the R1S SUV, which starts at $75,000. Even with these expensive price tags, the company experienced a loss of $39,000 per vehicle in the first quarter of the year.
After the announcement of the deal, Rivian’s stock experienced a significant surge of over 50 percent during extended trading on Tuesday.
This collaboration signifies a strategic maneuver for both Volkswagen and Rivian, potentially opening doors for substantial progress in the electric vehicle industry.