Rivian and Volkswagen have signed a deal on a joint venture, with the two companies sharing electric vehicle architecture and software.
The partnership will help Volkswagen speed up plans to develop electric vehicles using Rivian's technology. Rivian will license its existing intellectual property rights to the joint venture. Rivian gets a big infusion of capital that will help the company get ready to build its new R2 vehicle.
Rivian CEO RJ Scaringe tweeted the partnership offers Rivian an expected $5 billion in capital. VW will initially invest $1 billion through a note that is convertible to Rivian shares, according to a Rivian press release.
“Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it’s exciting that one of the world’s largest and most respected automotive companies has recognized this. Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth,” said Scaringe.
Electric automakers, including Rivian, have been coping with slowing demand and burning cash. Traditional automakers have had difficulty building battery-powered vehicles with advanced software.
“Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost,” said VW Group CEO Oliver Blume. “We are also acting in the best interest of our strong brands, which will inspire with their iconic products. The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness."
Rivian stock shares rose sharply in after-hours trading after Rivian announced the deal.
Volkswagen is the second traditional automaker to take a stake in Rivian. Ford initially invested but backtracked on co-development of electric vehicles with Rivian, and sold most of its shares last year.
At the end of March, Rivian reported it had $7.86 billion in cash, cash equivalents, and short-term investments. It is cutting costs by improving efficiency by 30% at the plant in Normal and by pausing a planned manufacturing plant in Georgia. In the first quarter, Rivian reported a loss of $1.45 billion.
Rivian said Tuesday it expects the deal with Volkswagen “to lower cost per vehicle for both companies by increasing scale and speeding up innovation globally.”
