In March, Rivian shelved its plans for a $5 billion factory an hour east of Atlanta. Rivian has said it intends to honor its commitment to build the Georgia plant, but it put the project on hold and announced plans to move initial production of its new low-cost EV, the R2, to its factory in Normal, 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. According to a news release, the planned partnership includes an additional $4 billion in investments by 2026, and software technologies developed as a result will be used in future EVs from both companies.
Rivian Chief Executive Officer R.J. Scaringe said Tuesday that he is committed to building a factory in Georgia as the company ramps up production, and he said the joint venture with Volkswagen would help that effort.
He added, “This partnership really provides a capital road map to secure and support not only the launch of R2 in Normal, but also the launch of that mid-sized platform at our Georgia facility and our path to positive free cash flow.”
He further added, “Knowing that we have a partner that is interested in our success not only because of the technology partnership, but also because of their equity ownership with us, is really helpful.”
The Rivian-VW joint venture will develop vehicles based on what the companies call “next-generation software-defined vehicle (SDV) platforms.” SDVs are vehicles that can be updated over time using software improvements.
Credit: Courtesy of Rivian
Credit: Courtesy of Rivian
Rivian's technology will form the basis of a software platform that both companies will use in new vehicles they develop in the coming years. Volkswagen has struggled to develop EV software.
Under the terms of the deal outlined in a letter to shareholders, Volkswagen will deliver its investment in a mix of convertible notes, equity and investments in the joint venture by 2026, contingent on Rivian achieving certain milestones.
Volkswagen Group CEO Oliver Blume said these milestones are “linked to technical proof points,” and the partnership will involve all aspects of their vehicles' software platforms. He said this includes infotainment systems, autonomous driving functions, software connectivity and how all those systems receive updates.
“(The purpose of this partnership) is to accelerate and rapidly transform our traditional software architecture into an architecture that is designed to focus on the software-defined vehicle,” Bloom said.
Credit: TNS
Credit: TNS
The announcement not only adds another potential automaker to invest in Rivian, but it's a vote of confidence at a time when the startup is focused on strengthening its balance sheet and becoming a profitable company. Rivian's stock price was up nearly 50% in after-hours trading as of 6:30 p.m. EDT on Tuesday.
Rivian postponed its factory construction plans in Georgia as a cost-cutting measure, saying the move would save more than $2.2 billion in short-term development costs. Rivian plans to begin production of its R2 crossover at its Illinois plant in 2026, but Scaringe has said Rivian will still need to build the factory in Georgia to have the capacity to increase production.
When choosing Georgia for its second factory, which is expected to employ 7,500 workers, state and local officials offered a $1.5 billion incentive package. However, most of the incentives will only go to Rivian if it collectively meets 80% of its promised jobs and investments by the end of 2030 and maintains those metrics through 2049. Otherwise, they will be subject to claw back measures.
Credit: Miguel Martinez
Credit: Miguel Martinez
Rivian reported a net loss of $1.4 billion in the first quarter of this year, wider than the $1.3 billion loss it posted in the first quarter of 2023. Rivian ended March with about $6 billion in cash and cash equivalents.
The joint venture will continue to exist as 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 effort through an equity investment in Rivian.
VW said it plans to invest $2 billion in the combined software company, while the remaining $3 billion will be used to buy equity in Rivian. Rivian Chief Financial Officer Claire McDonough told investors Tuesday evening that the first $1 billion investment from Volkswagen will be in the form of notes that will be converted into stock.
Amazon is currently Rivian's largest shareholder. Amazon is also a customer that has purchased 100,000 electric delivery vans. Cox Enterprises, which owns the Atlanta Journal-Constitution, also owns about a 3% stake in Rivian.
Scaringe said the partnership will benefit both Rivian and Volkswagen, not only improving his company's financial position but also improving software offerings in both companies' vehicles.
“The opportunity to apply (Volkswagen's) scale to achieve meaningful cost savings across our manufacturing materials and our business, as well as the ability from Volkswagen to drive the acceleration of this technology across more products, is really highly complementary,” he said.