July 19, 2024

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Volkswagen will invest up to $5 billion in electric vehicle maker Rivian

Volkswagen will invest up to  billion in electric vehicle maker Rivian

Volkswagen, the German automaker, said Tuesday that it will invest up to $5 billion in Rivian, an electric truck maker that has struggled to turn a profit, and that the two companies will collaborate on electric vehicle programs.

The deal creates an unusual alliance between the world’s second-largest automaker and an electric vehicle startup that has strived to live up to investors’ expectations that it will achieve the kind of success that has made Tesla the world’s most valuable automaker.

If successful, the partnership would address weaknesses at both companies. It would provide VW with software expertise that auto analysts say it sorely lacks. And, in addition to the cash, Rivian would benefit from the manufacturing expertise of an automaker that produces nearly 10 million vehicles a year, putting it just behind Toyota Motor Corp. in the global auto industry.

Volkswagen said it would initially invest $1 billion in Rivian, then increase this amount over time to $5 billion. If regulators approve the deal, Volkswagen could become a major shareholder. This investment represents a major vote of confidence in Rivian, which loses tens of thousands of dollars on every car it sells.

Rivian’s pickups and SUVs have received glowing reviews in the automotive press, but the company has struggled to ramp up manufacturing at its plant in Normal, Illinois. In recent months, many investors have become concerned that the company may not be able to survive long enough to become profitable.

RJ Scaringe, founder and CEO of Rivian, said the cash from Volkswagen will help Rivian launch a midsize SUV called the R2 that will sell for about $45,000, and complete a factory in Georgia. Rivian halted construction of the Georgia plant in March in an attempt to save more than $2 billion.

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“This is important for us financially,” Mr. Scaringe said of the Volkswagen partnership in a conference call with reporters on Tuesday.

The cheapest vehicle Rivian currently sells, the R1T pickup, starts at about $70,000, a price that has limited its sales to early, wealthy customers. The R1S SUV starts at $75,000. Even at those prices, Rivian lost $39,000 per vehicle it sold in the first three months of the year.

Rivian stock jumped more than 50 percent in extended trading on Tuesday after the deal was announced.

The electric vehicle market has been split between relatively young companies like Tesla and Rivian, which make battery-powered cars only, and established automakers like Volkswagen, General Motors and Toyota, which often struggle to master new technology.

With the exception of Tesla, none of the new American automakers specializing in electric cars has won a significant market share. Some, such as Fisker and Lordstown Motors, have ceased production and filed for bankruptcy protection.

Rivian has long been considered by auto analysts to be among the electric vehicle startups most likely to survive, in part because it has raised billions of dollars in investments. Amazon is one of its largest shareholders and a major customer of the company’s delivery trucks.

But Volkswagen and Rivian operate very differently, and working together can be a challenge for them. Volkswagen, headquartered in Wolfsburg, Germany, is known for its strict top-down management and is partly owned by the state of Lower Saxony. Rivian, based in Irvine, California, has a more liberal culture as a technology startup. Rivian said in April that it expects to sell 57,000 cars this year, far fewer than Volkswagen sells in a week.

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Mr. Skaring and Oliver Blume, CEO of Volkswagen, said the deal blossomed after the two met at a Porsche customer center and bonded over their love of cars.

“We have a very similar mindset,” Mr. Bloom said during the conference call.

Ford Motor Company was for a time a major shareholder in Rivian, and the two companies once said they would make SUVs together. But this plan never came to fruition, and Ford sold most of its shares in Rivian. Ford and Volkswagen have a separate partnership that includes the joint development and production of electric vehicles.

The Volkswagen-Rivian alliance could encourage other established automakers to consider investments or partnerships with startups like Lucid Motors — companies with well-respected but unprofitable technology that are struggling to establish themselves in a crowded market. Another major automaker, Stellantis, the parent company of Chrysler, Fiat and Peugeot, has invested in a Chinese company called Leap Motor to gain access to its electric-vehicle technology.

Volkswagen said vehicles using the software developed by the new joint venture will go on sale during the second half of the decade. Any of Volkswagen’s brands, including Audi and Porsche, could use the technology, Mr. Blume said. Scout, the American off-road brand that VW is reviving at a plant under construction in South Carolina, could also use the software.

But Volkswagen and Rivian will continue to market their cars separately.