Rivian, Volkswagen joint venture becomes official

German car giant the Volkswagen Group has raised its investment in US electric vehicle (EV) specialist Rivian, kickstarting their planned joint venture which will result in co-developed next-generation EV architecture and software.

In June this year, Volkswagen announced plans to invest US$5 billion (A$7.6bn) in Rivian until 2026, a move that proved to be a lifeline for Rivian during a time when it was losing nearly US$40,000 (A$61,000) for every vehicle it delivered.

The decision was approved by German lawmakers in July, and now Reuters reports Volkswagen has raised its investment by 16 per cent to US$5.8 billion (A$8.9bn), coming as Rivian gears up to launch its new R2 EV – a cheaper, smaller model alongside the R1T pickup and R1S SUV.

The joint venture is expected to see advanced electrical infrastructure and Rivian’s software technology integrated for future Volkswagen and Rivian EVs across all relevant vehicle segments, according to the two companies.

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“This partnership and this deal secures the capital for us to ensure that we can’t only take Rivian through the launch of R2 at Normal, but secures the launch of and growth of R2 in our Georgia facility and through (to being) cash flow positive for us as a business,” Rivian CEO RJ Scaringe said.

Rivian’s R2 will be the first vehicle on the new architecture and be built at the company’s facility in Normal, Illinois. The construction of its upcoming plant in Georgia was reportedly delayed last month.

It’s expected new vehicles from Volkswagen-owned Scout Motors – a rebirth of the classic brand which is focusing on off-road EVs – will be among the first on the new jointly developed architecture.

Volkswagen reportedly plans to invest the US$5.8 billion (A$8.9bn) in Rivian and the joint venture by 2027, including an initial US$1 billion (A$1.5bn) convertible note – a loan that can be converted to shares if specific conditions are met.

The German company will reportedly also invest $1.3 billion (A$2bn) for intellectual property licenses and an equity stake, as well as up to $3.5 billion (A$5.4bn) in future equity, notes and debt – all tied to milestones.

It’s possible the joint venture could help support Volkswagen’s Cariad software division, which has been blamed for delayed vehicle launches and been at the receiving end of a series of job cuts handed down by its overarching company.

The increase in investment follows Volkswagen asking its German workforce to take a 10 per cent pay cut as the company struggles with rising costs and falling demand.

Volkswagen announced the first public round of its collective bargaining consultation with its works council in late October, which included the proposed pay cuts. Negotiation representatives are next due to meet on November 21.

The carmaker’s third-quarter financial results showed its year-to-date operating result is down by 21 per cent compared to the first nine months of 2023 – standing at €12.9 billion (A$21 billion) to the end of September.

In contrast, shares in Rivian – valued at over US$11 billion (A$16.8 billion) – rose nearly nine per cent in extended trading following the joint venture announcement.

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