11:17 am, June 26, 2024
Volkswagen is to plough billions into US EV start-up Rivian in a move that will see them share EV software and platforms.
The German manufacturer said yesterday that it would be investing up to $5bn (circa £3.95bn). After the announcement was made, shares in Rivian soared by almost 50%. However, VW’s stock dipped today amid investors’ fears over costs and uncertainty, reported Reuters.
EV start-ups have been faced with a slowdown in demand as well as high interest rates and a lack of cash, while the established manufacturers have struggled to build EVs as well as advanced software.
Last week, US EV maker Fisker filed for bankruptcy protection, and earlier this year the UK arm of electric van outfit Arrival went into administration.
Rivian founder and CEO Robert ‘RJ’ Scaringe said the money from Volkswagen will enable it to develop its R2 SUVs, which are set to come out in early 2026 and are smaller and cheaper, as well as its planned R3 crossovers.
The equally controlled joint venture will cut Rivian’s operating costs as well, thanks to supplies including components and microchips.
In addition, it’ll help Rivian – which will license its intellectual property to the JV – become cashflow-positive. It currently loses almost $40,000 (£31,600) on each vehicle it delivers.
Rivian will have an immediate investment of $1bn (£790m) via a note converting to Rivian stock on December 1, assuming regulatory approvals.
Volkswagen will also pay $1bn when the JV arrives, which is expected in the last three months of this year.
VW will then invest $1bn in Rivian stock in 2025 and the same amount in stock the following year if Rivian reaches certain milestones, and provide a loan of $1bn in 2026.
Reuters quoted Vitaly Golomb, managing partner at Rivian investor Mavka Capital, as saying: ‘Any cash infusion like that is huge. Getting the support of Volkswagen Group certainly really strengthens their story toward Europe and toward Asia eventually.’
Meanwhile, VW’s injection of cash is seen by investors and analysts as a bid to sort its software problems.
Its software division Cariad, which was established under then VW Group CEO Herbert Diess, has gone over budget while failing to meet goals, with the double whammy contributing to his departure in September 2022.
Rivian, which was founded in 2009 and is seen as a rival to Tesla, has been cutting costs to stay afloat while trying to deliver its EVs on time. Supplier contracts have been renegotiated and some parts have been built in-house.
It is still to post a quarterly profit, while the first quarter of this year saw it make a net loss of more than $1.4bn (£1.11bn), said the BBC.
