NEW YORK, United States — German auto giant Volkswagen will invest $5 billion in US electric vehicle maker Rivian to create a joint venture expected to produce technology used by both automakers, the companies announced Tuesday.
The two firms will establish an equally controlled and owned joint venture “to create next-generation electrical architecture and best-in-class software technology,” the companies said in a news release.
Shares of Rivian rose 8.6 percent on Tuesday and more than 40 percent in after-hours trading following the deal’s announcement just after the end of the trading session.
Although praised for its technology, Rivian has been reporting losses and bleeding cash.
Under the transaction, VW will make an initial $1 billion investment in the US company in 2024 that will convert to Rivian common stock, to be followed by subsequent rounds in 2025 and 2026.
Capital infusion
“Today’s announcement is expected to create a robust capital roadmap to support our future growth,” Rivian said in a presentation.
VW’s investment will enable Rivian to fund investments to ramp up production at its Illinois factory and to advance a new plant in the state of Georgia, the company said.
READ: Volkswagen plans 10 more EV models by 2026
Those two projects enable “a path to positive free cash flow and meaningful scale,” Rivian said.
The venture will allow VW to employ Rivian’s existing electrical architecture and software plan, accelerating the German company’s efforts on software-defined vehicles.
“Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost,” said VW Chief Executive Oliver Blume.
“We are strengthening our technology profile and our competitiveness.”
The two companies expect completion of the transaction in the fourth quarter of 2024 with expected regulatory approvals.