VW will invest up to $5 billion in Rivian as part of new EV joint venture

Volkswagen is investing $1 billion in Rivian as part of a new joint venture that will give the German auto giant access to the buzzy California EV company’s software and EV platform. Rivian will receive an additional $4 billion over time, for a total sum of $5 billion.

The joint venture will be co-owned by Rivian and VW Group, which oversees brands like Audi, Porsche, Lamborghini, and its flagship Volkswagen. The two companies will introduce vehicles developed from the joint venture in the “second half of the decade,” they announced.

The new venture was announced in a post from Rivian CEO RJ Scaringe, who noted the investment will help the company bring its next generation R2 electric vehicle to market starting in 2026. The R2 is expected to be a more affordable $45,000 model than its current luxury-priced EVs, the R1T and R1S.

The companies said the partnership will bring Rivian’s new zonal architecture, available now through its refreshed second-generation R1 vehicles, as well as its vehicle software, to a “broader market.” Rivian recently became one of the few companies beyond Tesla to use a zonal architecture for its vehicles that rely on fewer electric control units than usual.

VW Group CEO Oliver Blume said all of the company’s brands could benefit from the partnership with Rivian, including potential competitor Scout Motors, which is planning to launch a new lineup of electric trucks in the US.

As the two companies began to discuss a partnership, Scaringe said there was a lot of “shared appreciation” around products and technology. The Rivian CEO also said he grew up as a “massive Porsche enthusiast” who would restore old 356s.

“What we found is a partnership and a relationship that was very consistent with our own beliefs,” he said in a briefing with reporters. “This isn’t something that I say lightly.”

The first $1 billion will be provided to Rivian in the form of an unsecure convertible note that will become Rivian common stock “subject to regulatory approval,” the companies said. An additional investment of up to $2 billion is expected to take place through two tranches of $1 billion each in 2025 and 2026.

“We are running very well and very quick, quicker than we expected,” Blume said in the briefing.

The money will no doubt come in handy, too. Like other EV-only companies, Rivian has been struggling through a period of cooling demand around electric vehicles. The company’s sales are up, but its losses are also increasing. It has $7.9 billion of cash and cash equivalents on hand, but it has acknowledged that cuts could be necessary if it’s ever going to achieve stability. Rivian has already gone through several rounds of layoffs in its short history.

Meanwhile, VW has been going through its own struggles around EVs. The company’s plug-in models are selling well, but its market share in North America is shrinking. And its software has been plagued by bugs and customer complaints.

VW isn’t the first legacy automaker to partner with Rivian. The company was planning to co-develop an electric SUV with Ford, but those plans were cancelled amid the covid pandemic. The plan was to use Rivian’s battery pack and electric motor setup in a Ford or Lincoln branded SUV. Ford invested $500 million in Rivian as part of the plan, along with $700 million from Amazon.

Asked whether the deal would make Rivian the exclusive partner to VW and its brands, Scaringe declined to answer directly.

“In the context of the joint venture, we have certainly talked about the ability to work on other products or private programs outside of the Rivian or Volkswagen Group portfolio,” he said. “But we have a lot to do in this program. We have a lot of products to work on. We are absolutely eyes on the prize, focused on the products within Rivian’s portfolio, within Volkswagen Group’s portfolio.”