Volkswagen and Rivian Are Joining Forces

Electric vehicle maker Rivian and giant German auto manufacturer VW have signed a joint venture. The partnership aims to speed up development of next-generation electrical architecture and software technology.

Big news for EV fans: on June 25th, the Volkswagen Group and Rivian Automotive announced their intentions to form a joint venture to create next-generation electric vehicles.

Under the terms of the agreement, Volkswagen will invest an initial $1 billion in Rivian with up to an additional $4 billion expected over the course of the partnership.

Rivian, of course, makes some exciting and compelling all-electric vehicles such as the R1S SUV, and has lofty plans for models like the R2 and R3X. However, the company has been burning though cash at an alarming rate in order to produce these vehicles. In the first quarter of 2024, the company reported a gross profit loss of $527 million.

On the other hand, Volkswagen has a more solid financial footing, but their EV lineup — while impressive in its own ways — is more conventional in terms of technology and development than Rivian's vehicles. This joint venture will address these weakness and combine the strengths of both companies. Investors reacted positively to the news, with Rivian stock surging around 40 percent after the announcement.

The Volkswagen investment in Rivian is expected to lower the latter's average cost to produce each EV. In addition, the companies believe that technology innovation will be sped up through the deal. The first vehicles benefiting from the technology developed as part of this joint venture are expected to hit the market towards the end of the decade.

Oliver Blume, CEO of VW, said in a statement that “Our customers benefit from the targeted partnership with Rivian to create a leading technology architecture. Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost.”

RJ Scaringe, founder and CEO of Rivian, is also optimistic about the new deal from both a financial and a vehicle development aspect. “Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth. Rivian was created to help the world to transition away from fossil fuels through compelling products and services, and this partnership is beautifully aligned with that mission,” said Scaringe.

The initial $1 billion investment will take place by the end of the year, with the formation of the joint venture expected to be finalized in the fourth quarter. The additional $4 billion worth of investments are planned to take place in two $2 billion increments in 2025 and 2026.

This investment could be a game changer for future EV development. It provides a clear path for Rivian to be able to afford to develop their next generation of vehicles, qnd it should provide Volkswagen with a significantly improved EV lineup — all at a reduced cost to the consumers. This deal could be a winner for everyone... and a model for future tie-ups between legacy automakers and EV upstarts.