Volkswagen Group (VW) and Tesla rival Rivian have announced the formation of a joint venture, with the German automotive giant increasing its investment in the partnership. Initially, VW had pledged $5 billion, but the deal’s value has now risen to $5.8 billion (£4.55 billion).
Following the announcement, shares in Rivian, the US electric vehicle (EV) manufacturer, surged by more than 9% in after-hours trading. This collaboration will enable both companies to share essential technology at a time when the growth in electric car sales is slowing and competition from Chinese manufacturers is intensifying.
For Rivian, which has been operating at a loss, this joint venture provides a vital source of funding as it gears up for the launch of its R2 model next year. The R2 is a smaller and more affordable sports utility vehicle (SUV) compared to Rivian’s current offerings.
On the other hand, VW will benefit from integrating Rivian’s technology into its own vehicle lineup. The first VW models featuring Rivian technology are expected to hit the market as early as 2027.
In a joint statement, the companies said, “By combining their complementary expertise, the two companies plan to reduce development costs and scale new technologies more quickly.” Under the agreement, developers and software engineers from both companies will initially collaborate in California. Additionally, three other facilities will be established in North America and Europe.
This partnership comes amid growing expectations that VW, Europe’s largest car manufacturer, is preparing to announce significant cost-cutting measures. The VW Group, which includes brands such as Audi, Lamborghini, and Porsche, has been grappling with higher costs, declining sales, increased competition from Chinese EV makers, and a slower-than-anticipated transition away from petrol and diesel vehicles.
Meanwhile, Rivian has also been taking steps to reduce costs in response to weakening demand for EVs. The startup, which has yet to achieve profitability, has been renegotiating contracts with suppliers and streamlining its manufacturing processes.
In addition to SUVs, Rivian produces electric delivery vans, primarily for online retail giant Amazon, its largest shareholder. Amazon has placed an order for 100,000 of these vehicles, all of which are scheduled to be delivered by the end of the decade.
