Volkswagen Announces $5 Billion Investment in Rivian, Shares Surge
German automaker Volkswagen has revealed plans to invest up to $5 billion in electric vehicle startup Rivian. The investment will begin with an initial contribution of $1 billion, with the remaining $4 billion expected to be invested by 2026. This significant investment includes a joint venture to develop electrical architecture and software technology, with $1 billion planned for each of the years 2025 and 2026, followed by an additional $2 billion in 2026.
The announcement has had an immediate impact on Rivian’s stock price, with shares soaring approximately 40% during after-hours trading on Tuesday. This surge in stock value comes as welcome news for the company, which has faced pressure from Wall Street due to its cash burn and substantial losses. Despite the recent increase, Rivian’s stock price has still experienced a decline of around 49% in 2024, closing at $11.96 per share on Tuesday.
Volkswagen’s investment will initially take the form of a convertible note, which can be converted into Rivian shares starting from December 1st. The partnership between Volkswagen and Rivian marks the second time a legacy automaker has taken a stake in the California-based company. Previously, Ford Motor was one of Rivian’s largest stakeholders with a 12% share, alongside Amazon when Rivian went public in 2021. However, Ford Motor exited its investment in Rivian in 2023 after deciding against co-developing electric vehicles with the company.
This collaboration between Volkswagen and Rivian comes at a time when automakers are reevaluating their strategies due to slower-than-expected adoption of electric vehicles. It remains uncertain how this deal will impact Volkswagen’s plans to construct a $2 billion EV plant for its new Scout Motors trucks and SUVs in South Carolina.
Rivian has been actively pursuing cost-cutting measures in recent months. The company has reduced its workforce, optimized its Illinois manufacturing facility to enhance efficiency, and temporarily halted the construction of a new factory in Georgia. This decision is expected to result in savings of over $2.25 billion in capital spending, including the costs associated with launching Rivian’s next-generation R2 vehicle at its Illinois plant.
In terms of financials, Rivian reported a loss of $1.45 billion in the first quarter of this year as it underwent plant retooling in Normal, Illinois, to introduce updated versions of its R1T pickup and R1S SUV electric vehicles ahead of the release of its next-generation models in 2026. However, the company maintains a strong financial position with $7.86 billion in cash, cash equivalents, and short-term investments as of March, representing a total liquidity of over $9 billion.
As this partnership between Volkswagen and Rivian develops, it is important to stay informed about any updates or further details that may arise. This story is still unfolding, and additional information may be forthcoming.
Sources:
– https://www.cnbc.com/2024/06/29/volkswagen-to-invest-up-to-5-billion-in-electric-truck-maker-rivian.html
– https://www.businesswire.com/news/home/20240625005196/en
