German automaker Volkswagen has announced plans to invest up to $5 billion in Rivian, a California-based electric truck company, as reported by The New York Times. The deal will have the two auto manufacturers collaborate on building software for electric vehicles.
The first production of Rivian's EVs began in 2021. When the company went public in late 2021, it attracted $13.5 billion in net proceeds from big supporters, including Morgan Stanley and Amazon. However, Rivian failed to increase production to meet expectations. In 2022, Rivian lost $6.8 billion, and poor reliability scores caused it to be one of the worst car brands of 2024, according to Consumer Reports.
Per the Times, Volkswagen will invest $1 billion in Rivian initially and increase this to as much as $5 billion over time. For Volkswagen, an established carmaker since 1937, the partnership will help it make strides in EV technology. Rivian has a unique approach to manufacturing, opting for a separate motor drive in each wheel, which proves useful for off-road driving, as detailed by Jalopnik.
Volkswagen has struggled to compete with newer EV manufacturers, such as Tesla, that have arguably superior technology. While Volkswagen's EV sales increased by 21% in 2023, according to Electrek, it still only represents 8% of the world's EV sales.
"This is important for us financially," said RJ Scaringe, founder of Rivian, per the Times. Rivian's stock jumped by more than 50% after the deal was announced. The company's stock has doubled since its lowest mark in April. With the money, Rivian hopes to launch a midsize SUV and complete the construction of a factory in Georgia, the Times reported.
Most notably, Rivian plans to sell its new vehicle for $45,000, about $25,000 cheaper than any vehicle it currently sells. While EVs can help save drivers hundreds of dollars annually on fuel costs, the upfront cost can still be expensive. According to Kelley Blue Book, the average cost of an EV was $56,371 in June, compared to $48,644 for traditional gas-powered cars.
Luckily for consumers, EV prices are plummeting. Volkswagen itself has announced plans in Europe to release an EV for around €20,000 (just under $22,000). There are also tax credits and incentives that can save drivers up to $7,500 for certain new electric vehicles. With investment deals such as the one between Volkswagen and Rivian, the price of EVs can continue to become more affordable.
Volkswagen hopes to have the software developed for the joint venture in new EVs in the second half of the decade.
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