In March, Rivian put plans to build a $5 billion factory about an hour east of Atlanta on hold. While the company said it plans to keep its Georgia factory commitments, it paused the project and announced plans to move initial production of its new, lower-cost electric car, the R2, to a factory in Normal, Illinois.
Volkswagen Group will invest $1 billion in Rivian as an initial investment and take an equity stake in the startup, making it one of the company’s largest investors. The planned partnership includes an additional $4 billion in investments through 2026, and the software technology developed will be used in both companies’ future EVs, according to a news release.
Rivian CEO RJ Scaringe said Tuesday the company remains committed to building out the Georgia plant as it expands production, and that the joint venture with Volkswagen will help with that effort.
“This partnership not only secures and supports the launch of R2 in Normal, but it really provides a capital roadmap to support the launch of the mid-size platform at our Georgia facility and a path to positive free cash flow,” he said.
He adds, “Knowing we have a partner that has an interest in our success, not just through a technical partnership but also through an equity stake, really helps.”
The Rivian-VW joint venture will develop what the companies call a “next-generation software-defined vehicle (SDV) platform,” which is a vehicle that can be updated over time with software improvements.
Credit: Rivian
Credit: Rivian
Rivian’s technology will form the basis of a software platform for future vehicles developed by the two companies, as Volkswagen struggles to develop EV software.
According to terms of the agreement revealed in a letter to shareholders, Volkswagen will invest in the joint venture through 2026 through a combination of convertible debt, equity and investment, subject to Rivian hitting certain milestones.
Volkswagen Group CEO Oliver Blum said these milestones are “tied to technological proof points” and that the partnership will include all aspects of the software platform for both companies’ vehicles, including infotainment systems, autonomous driving features, software connectivity and how all these systems receive updates.
“(The partnership) is designed to accelerate and rapidly transform our company from our traditional software architecture to one that is designed to be focused on software-defined vehicles,” Bloom said.
Credit: TNS
Credit: TNS
The announcement not only adds another automaker to potentially invest in Rivian, but also serves as a vote of confidence at a time when the startup is focused on strengthening its balance sheet and becoming a profitable company.Rivian shares rose nearly 50% in after-hours trading around 6:30 p.m. EDT on Tuesday.
Rivian has delayed plans to build a Georgia factory as a cost-saving measure, saying the move will save it more than $2.2 billion in near-term development costs. Rivian plans to start building the R2 crossover at its Illinois plant in 2026, but Scaringe said it needs to build a Georgia factory to scale up production.
When Rivian selected Georgia as the site for its second factory, it offered a $1.5 billion incentive package that would create 7,500 jobs, but most of the incentives would only be returned to the company if it achieved 80% of its promised jobs and investment by the end of 2030 and maintained those levels through 2049. Otherwise, it would be subject to cancellation.
Credit: Miguel Martinez
Credit: Miguel Martinez
Rivian reported a net loss of $1.4 billion in the first quarter of this year, up from a $1.3 billion loss in the first quarter of 2023. Rivian had a cash and cash equivalents balance of about $6 billion at the end of March.
The joint venture would be set up as a separate company led by the two CEOs of Rivian and Volkswagen, with Rivian expected to contribute technology development and Volkswagen to fund the venture through an equity investment in Rivian.
VW said it plans to invest $2 billion in the joint venture software company and use the remaining $3 billion to buy a stake in Rivian. Rivian Chief Financial Officer Claire McDonough told investors on a conference call Tuesday night that the initial $1 billion investment from Volkswagen will be in the form of bonds that will convert into equity.
Amazon is currently Rivian’s largest shareholder. It is also a customer that has purchased 100,000 electric delivery vans. Cox Enterprises, which owns the Atlanta Journal-Constitution newspaper, also owns about 3% of Rivian.
Scaringe said the partnership will benefit both Rivian and Volkswagen, not only improving Rivian’s financial position but also improving the companies’ software offerings for their vehicles.
“The opportunity to leverage Volkswagen’s scale to realize significant cost savings across our building materials and operations, combined with Volkswagen’s ability to bring this technology to more products at an accelerated rate, is highly complementary,” he said.
