In March, Rivian suspended its plans for a $5 billion-an-hour plant east of Atlanta. Rivian has said it intends to honor its commitment to build the Georgia plant, but it suspended the project and announced plans to move initial production of its new lower-priced EV, the R2, to its plant 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. The planned partnership includes $4 billion in additional investment through 2026 and will result in the use of software technologies developed in both companies’ future EVs, according to a press release.
Rivian CEO RJ Scaringe said Tuesday that he remains committed to building the Georgia plant as the company ramps up production, and he said the joint venture with Volkswagen will help that effort.
“This partnership really provides a capital roadmap to secure and support not only the launch of R2 in Normal, but also to support the launch of that midstream platform at our facility in Georgia and our path to positive free cash flow ,” he said.
He went on to say that, “Knowing that we have a partner who is not only interested in our success, because of the technical partnership, but also because of their equity ownership in us, is really rewarding.”
The Rivian-VW joint venture will develop what the companies called “next-generation software-defined vehicle (SDV) platforms.” SDVs are vehicles that can be updated over time using software upgrades.
Credit: Courtesy Rivian
Credit: Courtesy Rivian
Rivian’s technology will be the basis of that software platform, which will be used by both companies in new vehicles that will be developed in the coming years. Volkswagen has struggled to develop EV software.
Under the terms of the deal disclosed in a letter to shareholders, Volkswagen will secure its investment in a mix of convertible notes, equity and investments in the joint venture through 2026, subject to certain milestones being met by Rivian .
Oliver Blume, CEO of the Volkswagen Group, said these milestones are “linked to technical test points” and the partnership will cover all aspects of their vehicles’ software platforms. He said this includes infotainment systems, autonomous driving functions, connectivity software and how all these systems receive updates.
“(This partnership) aims to accelerate and transform more quickly from our traditional software architecture to one that is designed to focus on a software-defined vehicle,” Blume said.
Credit: TNS
Credit: TNS
The announcement not only adds another potential carmaker to invest in Rivian, but is a vote of confidence at a time when the startup is focused on maintaining its balance sheet and becoming a profitable company. Rivian’s share price was up nearly 50% in after-hours trading as of around 6:30 pm EDT on Tuesday.
Rivian postponed its plans to build the factory 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 out the Georgia plant to have the capacity to scale production.
In choosing Georgia for its second plant, which is expected to employ 7,500 workers, state and local officials offered a $1.5 billion stimulus package. However, most of the incentives go to Rivia only if it collectively meets 80% of promised jobs and investments by the end of 2030 and maintains those metrics until 2049. Otherwise, they would be subject to measures of return.
Credit: Miguel Martinez
Credit: Miguel Martinez
Rivian reported a net loss of $1.4 billion for the first quarter of this year, larger than its loss of $1.3 billion in the first quarter of 2023. Rivian ended March with nearly $6 billion in cash and cash equivalents .
The joint venture will exist as a separate entity headed by two CEOs: one from Rivian and the other from Volkswagen. Rivian is expected to contribute to the development of the technology, while Volkswagen is funding the effort through equity investments in Rivian.
VW said it plans to invest $2 billion in the software joint venture, while the other $3 billion will be used to buy equity in Rivian. Rivian Chief Financial Officer Claire McDonough told investors on a call Tuesday evening that Volkswagen’s first $1 billion investment will be in the form of a note that converts to stock.
Amazon currently ranks as 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 this partnership will benefit both Rivian and Volkswagen, which will not only improve his company’s financial position, but also both companies’ software offerings within their vehicles.
“The opportunity to apply (Volkswagen) scale to achieve significant cost savings in our building materials and across our business, along with the ability to drive the acceleration of this technology into more products on the Volkswagen side, it is very complementary indeed,” he said.