Volkswagen Allocates $5 Billion to U.S.-based Electric Vehicle Manufacturer, Rivian
At VW's software subsidiary Cariad, things haven't been going smoothly. To tackle this, VW is resorting to a different strategy. Over the next few years, VW is expected to pump up to $5 billion into US electric vehicle maker Rivian and a joint venture.
VW is seeking help from struggling US EV startup Rivian in developing the next-gen automotive software. This investment could reach up to $5 billion. VW and Rivian aim to establish an equal partnership through this joint venture.
The partnership's goal is to speed up VW's software plans. The Software Defined Vehicle development will now be consolidated in the new joint venture with Rivian, moving away from Cariad, which has been in the news due to delays and restructuring.
Rivian's tech will underpin the software of future EV models from VW, as per the statement. These vehicles are slated to hit the market before 2030. VW CEO Oliver Blume commented, "With our partnership, we'll bring the best solutions quicker and at reduced costs into our vehicles." The software will be used for vehicles from Rivian and the entire VW Group, including the new USA-based electric vehicle brand Scout. Contrary to popular belief, Cariad is not being phased out, as per Blume.
VW is responding to the ongoing issues at Cariad. Former VW CEO Herbert Diess had ambitious software plans with Cariad, but the project has been in the limelight for problems and delays.
Due to the delay in software for the luxury platform PPE, daughters Audi and Porsche had to push back the introduction of new models by several years. The complicated software architecture of Wolfsburg-based company is seen as an issue. The joint venture with Rivian is expected to alleviate software development for new electric cars on the SSP platform.
Rivian Needs Cash
VW is investing up to €3 billion in Rivian. For electric vehicle manufacturer Rivian, this is a much-needed financial boost: Like other startups, the company is grappling with the current slump in the EV market. Rivian is losing nearly $40,000 with each sold vehicle. Recently, the company had to cut production to save money.
With VW's cash, Rivian plans to fund the development of the cheaper and smaller R2 SUV, expected in 2026, according to Rivian CEO RJ Scaringe. The stock market responded positively to this news. Rivian stocks surged about 50% in after-hours trading, adding nearly $6 billion to its market value. "Every capital injection like that is massive," said Vitaly Golomb, partner at Rivian investor Mavka Capital. "With the support of the VW Group, Rivian's history is being strengthened towards Europe and ultimately towards Asia."
In a first step, VW signs a convertible bond for $1 billion, which can be converted into Rivian stocks by December. VW plans to invest an additional $1 billion into Rivian stocks each in 2025 and 2026. For the Joint Venture itself, VW is prepared to invest up to $2 billion; a portion of this will be available for the licensing of Rivian-Software at its founding, scheduled for the end of 2024.
Read also:
- Volkswagen, a renowned German carmaker, is investing heavily in Rivian, an US-American electric car manufacturer, allocating up to $5 billion to accelerate their software development plans.
- The partnership with Rivian will see Volkswagen utilizing its cutting-edge technology in electric vehicles, with the software set to power future models before 2030.
- The investment in Rivian comes at a crucial time for the electric vehicle manufacturer, which is currently grappling with financial challenges and negative profit margins of nearly $40,000 per vehicle sold.
- German automakers are turning to electromobility as a key strategy, with Volkswagen's investment in Rivian being a significant step in boosting its electric car manufacturing capabilities and competing in the growing US market.
