Photo Credit: Volkswagen
German auto giant Volkswagen will invest $5 billion in US electric vehicle maker Rivian and create a joint venture expected to produce technology used by both automakers, the companies announced Tuesday.
The collaboration includes a direct $3 billion investment by the German company in Rivian as well as $2 billion to establish an equally controlled and owned joint venture "to create next-generation electrical architecture and best-in-class software technology," the companies said in a news release. Shares of Rivian rose 8.6 percent on Tuesday and nearly 50 percent 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 $1 billion investment in the US company in 2024 that will convert to Rivian common stock, to be followed by subsequent rounds in 2025 and 2026 of $1 billion each.
The additional $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 companies 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 $2 billion of JV-related capital. It's the full $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.
Lewis Musonye
