According to Reuters, German automaker Volkswagen Group announced on June 25 that it would invest up to 5 billion US dollars in Rivian, an American electric vehicle manufacturer, as part of a joint venture with an equal controlling stake.
Through this investment plan, the two sides aim to share electric vehicle architecture and software technology, and jointly promote the development of the electric vehicle industry. ID.5 GTX. Photo Source: Volkswagen, Rivian shares soared about 50% in after-hours trading after Volkswagen Group announced the investment plan.
That increase, if sustained in official trading on June 26, could add nearly $6 billion to Rivian’s market capitalization.
The automotive industry is currently facing a critical moment, especially in the field of electric vehicles.
Electric car startups need to grapple with the challenge of slowing demand in a market environment of high interest rates and reduced cash, while traditional carmakers are accelerating the transition to battery-powered cars and advanced software technology.
industry competition and change are becoming increasingly fierce.
RJ Scaringe, CEO of Rivian, revealed that the Volkswagen Group’s investment will provide Rivian with the necessary funds to support its future product development plans, such as the lower-priced, smaller R2 SUV to be launched in early 2026 and the planned R3 crossover model.
Rivian is known for its flagship R1s SUV and R1T pickup trucks, and the Volkswagen Group’s investment has also helped it achieve positive cash flow growth.
Rivian plans to license its existing intellectual property rights to the new joint venture, while Rivian R2 SUV will be the first car to use the joint venture’s software.
A number of Volkswagen brands, including Audi, Porsche, Lamborghini and Bentley, will also be equipped with the new joint venture software in the future.
Vitaly Golomb, managing partner of Rivian investor Mavka Capital, commented that any such cash injection would be huge and that Volkswagen’s support would really strengthen Rivian’s ability to expand into European and Asian markets.
For Volkswagen, analysts and investors see the investment as a solution to the company’s software woes.
Previously, Deiss, the former chief executive of Volkswagen Group, created a software division called Cariad that exceeded its operating budget and failed to meet its goals.
Due to delays in Cariad’s software development, the launch of a number of new cars was delayed, and Deiss stepped down in September 2022.
Volkswagen will immediately invest $1 billion in Rivian through a note.
The note will be converted into Rivian shares on December 1, but is still subject to regulatory approval.
Meanwhile, Volkswagen will pay another $1 billion when the joint venture is set up in the fourth quarter of this year.
In addition, Volkswagen will invest $2 billion in Rivian stock, including $1 billion each in 2025 and 2026, provided the startup meets certain goals.
Volkswagen will also provide a $1 billion loan to Rivian in 2026.
Scaringe said the partnership with Volkswagen Group will enable Rivian to reduce operating costs by sharing chips and spare parts.
The joint venture will make use of Rivian’s regional hardware design and integrated software platform to lay an important foundation for the future development of software-defined electric vehicles.
Instead of deploying microchips throughout the vehicle, Rivian creates centralized areas that control multiple functions in each area, thus greatly reducing the demand for semiconductor chips and reducing costs.
Volkswagen Group and Rivian aim to launch vehicles using this technology after 2025.
Although Volkswagen Group and Rivian will work closely together in the joint venture, the two companies will continue to operate their respective vehicle development businesses.
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