Volkswagen AG has announced plans to increase its investment in U.S.-based automaker Rivian by 16%, raising the total investment to $5.8 billion. This move is accompanied by the launch of a joint venture between the two companies to develop electric vehicle (EV) architecture and software. Following the announcement, Rivian's stock (RIVN, Financial) surged nearly 9% in after-hours trading.
Previously, in June, Volkswagen committed to investing $5 billion in Rivian, offering a financial lifeline to the loss-making EV startup. With high borrowing costs and a slowdown in EV demand, Rivian is gearing up to release the R2, a smaller and more affordable electric SUV. CEO RJ Scaringe emphasized that the partnership and financial infusion will enable Rivian to manufacture the R2 at its Normal, Illinois plant and ensure the growth and production of R2 in Georgia, ultimately leading the company towards positive cash flow.
The R2 will be the first vehicle to use Rivian's new architecture, with production beginning at the Illinois facility. Although the construction of the Georgia plant has been delayed, Rivian recently applied for a federal loan to kickstart the building process.
Volkswagen plans to invest $5.8 billion in Rivian and the joint venture by 2027. This includes an initial $1 billion in convertible notes, $1.3 billion for IP licensing and equity purchases, and up to $3.5 billion for future equity, notes, and debt purchases, all tied to achieving specific milestones.
Analysts suggest that the joint venture with Rivian could help alleviate issues faced by Volkswagen's software division, Cariad, which has struggled with delays and losses since its inception. The German automaker recently proposed a 10% pay cut for workers, citing it as essential for maintaining competitiveness, while unions have threatened strikes in response.
Rivian's Chief Software Officer Wassym Bensaid and Volkswagen Group's Chief Technical Engineer Carsten Helbing will lead the joint venture. Development and engineering teams will initially operate in Palo Alto, California, with three additional locations under consideration. The venture aims to leverage Rivian's existing technology to launch the R2 in the first half of 2026, with potential plans to introduce Volkswagen models by 2027.
