The automaker is investing up to $5 billion in Rivian, an electric truck maker that is struggling to increase sales and break even. The German automaker saidthat the companies will collaborate on software development for electric vehicles.
The deal creates an unusual alliance between the world's second-largest automaker and an electric-car startup struggling to meet investors' expectations and achieve Tesla-like success. The partnership could address the weaknesses of both companies by providing Volkswagen with the software expertise it needs and Rivian's manufacturing expertise.
Volkswagen says it will initially invest $1 billion in Rivian and later increase that amount to $5 billion. If regulators approve the deal, Volkswagen could become a major shareholder. This infusion represents a significant leap of faith for Rivian, which loses tens of thousands of dollars on every car sold.
Rivian pickups and SUVs have received rave reviews, but the company is scrambling to ramp up production at its plant in Normal, Illinois. In recent months, many investors have worried that the company may not survive long enough to become profitable. RJ Scaringe, Rivian's founder and CEO, said the money from Volkswagen will help launch the R2 midsize SUV, which will sell for about $45,000, and complete the Georgia plant.
The cheapest car currently sold by Rivian is R1T pickup truckcosts from $70,000, which limits its sale to wealthy buyers. SUV R1S starts from $75,000. Even at those prices, Rivian lost $39,000 on every car sold in the first three months of the year.
Rivian shares jumped more than 50% in extended trading after the deal was announced. The electric car market is divided between young companies like Tesla and Rivian, which produce only battery-powered cars, and established automakers like Volkswagen, General Motors and Toyota, which often struggle to adopt new technology.