In March, Rivian shelved its plans for a $5 billion factory an hour east of Atlanta. Rivian said it intended to honor its commitment to build the Georgia plant, but suspended the plan and announced plans to shift initial production of its new low-cost EV, the R2, to its factory in Illinois.
Volkswagen Group plans to invest an initial $1 billion in Rivian, taking an equity position in the startup and becoming one of the company’s largest investors. The planned partnership includes an additional $4 billion in investments through 2026, and the software technologies developed will be used in both companies’ future EVs. According to a news release.
Rivian CEO R.J. Schaering said Tuesday that he is committed to keeping the Georgia factory in production, and said the joint venture with Volkswagen will help that effort.
“This partnership really provides a capital roadmap to secure and support the normalized rollout of R2, but also to launch the mid-size platform at our Georgia facility and support our path to positive free cash flow,” he said.
He continued, “It’s really helpful to know that we have a partner who has a vested interest in our success, not just because of the technology partnership, but also because of their equity ownership in us.”
The Rivian-WW joint venture will develop so-called “next-generation software-defined vehicle (STV) platforms.” SDVs are vehicles that are updated over time using software upgrades.
Thanks: Courtesy Rivian
Credits: Courtesy Rivian
Rivian’s technology will form the basis of that software platform, which will be used by both companies in new vehicles developed in the coming years. Volkswagen struggled to develop EV software.
Disclosed under contractual terms In a letter to shareholdersVolkswagen will offer its investment in a combination of convertible notes, equity and investments as Rivian meets certain milestones by 2026.
Oliver Bloom, CEO Volkswagen Group, said those milestones are “linked to technology proof points” and that the partnership will cover all aspects of their vehicles’ software platforms. He said the infotainment system, autonomous driving functions, software connectivity and how all those systems are getting updates.
“(This partnership) will accelerate and accelerate our transition from our traditional software architecture to an architecture designed to focus on a software-defined vehicle,” Bloom said.
Credit: TNS
Credit: TNS
The announcement not only adds another potential automaker to invest in Rivian, but it’s also a vote of confidence at a time when the startup is focused on growing its balance sheet and becoming a profitable company. Rivian’s share price was up nearly 50% in after-hours trading as of 6:30 p.m. Tuesday.
Rivian postponed its Georgia factory construction plans as a cost-cutting measure, saying the move would save more than $2.2 billion in short-term development costs. Rivian plans to start production of its R2 crossover at its Illinois plant in 2026, but Schering said Rivian still needs to build a Georgia factory to have the capacity to scale production.
State and local officials offered $1.5 billion in incentives to select Georgia for its second factory, which is expected to employ 7,500 workers. However, most of the incentives will be available to Rivian only if it collectively meets 80% of its promised jobs and investment by the end of 2030 and maintains those metrics through 2049.
Credit: Miguel Martinez
Credit: Miguel Martinez
Rivian posted a net loss of $1.4 billion in the first quarter of this year, larger than its $1.3 billion loss in the first quarter of 2023. Rivian ended March with nearly $6 billion in cash and cash equivalents.
The joint venture will be a separate entity led by two CEOs: one from Rivian and the other from Volkswagen. Rivian is expected to contribute to technology development, while Volkswagen is funding the initiative through equity investments in Rivian.
VW said it plans to invest $2 billion in the joint software company, while the other $3 billion will be used to buy a stake in Rivian. Rivian Chief Financial Officer Claire McDonough told investors on a Tuesday evening call that Volkswagen’s first $1 billion investment will be in the form of a note that will convert into stock.
Amazon is currently Rivian’s largest shareholder. Amazon is a customer that has purchased 100,000 electric delivery vans. Cox Enterprises, which owns The Atlanta Journal-Constitution, also owns about 3% of Rivian.
Schering said the partnership will benefit both Rivian and Volkswagen, not only improving his company’s financial position but also improving the software delivery of both companies into their vehicles.
“The opportunity to use (Volkswagen’s) scale to achieve meaningful cost savings across our building materials and our business, and the ability on the Volkswagen side to translate this acceleration of technology into more products, is really very complementary,” he said.
