Volkswagen invests £4bn in US electric vehicle maker Rivian to access its software technology

VW boss says deal will help it bring new EVs to market quicker and at lower costSizable investment will also help the US start-up that's been facing big losses 

German car giant Volkswagen Group will invest up to $5billion (£4bn) in US electric vehicle maker Rivian as part of a joint venture to share EV architecture and software.

The sizable investment will provide a financial lifeline to Rivian following a spate of losses and help to fund development of upcoming models.

The deal will also give VW access to the start-up's more advanced software for its forthcoming EVs, and could mean new models will arrive quicker and at lower prices to customers.

In a joint statement, the companies said models featuring new architecture would enter the market in the second half of the decade.

The $5bn investment will give Volkswagen access to software technology developed by US electric car start-up, Rivian. VW boss says it should help reduce future EV prices for customers

The investment is a welcome boost for Rivian.

In March, it was forced to pause plans to build a new manufacturing plant in Georgia as part of efforts to conserve cash while contending with deep losses, which amounted to almost $40,000 per vehicle built last quarter.

Like the broader auto industry, the US start-up is grappling with a slowdown in demand for its electric vehicles, which has been triggered by a combination of driver concern over price, charging infrastructure and range anxiety, as well as high interest rates and the wider cost of living squeeze.

More established traditional car makers - including VW -  are also facing difficulties adjusting to battery vehicle production and the advanced software they require.

The investment will provide Rivian the funding necessary to develop its less expensive and smaller R2 SUVs that are set to roll out to the US market in early 2026 and arrive in Europe and the UK a year later.

Moreover, the partnership will enable Rivian to cut operating costs by leveraging volumes of supplies including chips and components, Rivian chief executive RJ Scaringe told Reuters.

To keep its head above water, Rivian has been slashing costs even as it works to deliver its EVs on time. It has also been renegotiating supplier contracts and building some parts in-house.

Rivian is currently facing big losses. In March, it was forced to pause plans to build a new manufacturing plant in Georgia

Rivian boss RJ Scaringe (pictured) said the partnership will 'help secure our capital needs for substantial growth'

The investment will provide Rivian the funding necessary to develop its less expensive and smaller R2 SUVs that are set to roll out to the US market in early 2026

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The company has overhauled its manufacturing process, which has led to a significant reduction in cost of materials, Scaringe told Reuters last week.

For Volkswagen, analysts and investors see the investment as a move to solve the company's software struggles.

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VW's software division, Cariad - set up under former VW Group chief executive Herbert Diess - has exceeded its budget and failed to meet goals. That contributed to Diess' exit in September 2022.

'The partnership is anticipated to accelerate the development of software for Rivian and Volkswagen Group.

'It is expected to allow both companies to combine their complementary strengths and lower cost per vehicle by increasing scale and speeding up innovation globally,' a joint statement said.

'Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade.

'In the short term, the joint venture is expected to enable Volkswagen Group to utilize Rivian's existing electrical architecture and software platform,' the statement added.

Each company will continue to separately operate their respective vehicle businesses, both confirmed.

Oliver Blume, chief executive of Volkswagen Group said customers would benefit from the partnership with new EVs arriving 'faster and at lower cost'.