Volkswagen to invest USD1 billion in Rivian Automotive, plans JV

Germany’s Volkswagen AG has announced an initial investment of USD1 billion in Rivian Automotive Inc. and intends to establish a joint venture focused on next-generation electrical/electronic (E/E) architecture for electric vehicles.

Rivian is an American electric vehicle manufacturer and automotive technology company founded in 2009. It focuses on designing and producing electric adventure vehicles, including the R1T pickup truck and the R1S SUV, both known for their off-road capabilities, long-range batteries, and sustainable design.

This decision, approved by Volkswagen’s Supervisory Board, involves a convertible promissory note that will convert into a direct shareholding once regulatory approvals are obtained, no earlier than December 1, 2024. The exact size of Volkswagen’s shareholding will be determined based on Rivian’s average share prices at the time of the agreement and at the conversion date.

The proposed joint venture will see both Volkswagen and Rivian holding equal stakes and control. This collaboration aims to integrate Rivian’s current E/E architecture technology into Volkswagen’s electric vehicles, enhancing their technological capabilities. The joint venture’s establishment depends on several factors, including the technical feasibility of integrating the E/E architecture into Volkswagen vehicles, further negotiations, and regulatory approvals.

If the joint venture is successfully established, Volkswagen plans to invest an additional USD4 billion in Rivian and the joint venture by 2026. This investment will be divided into multiple tranches, with USD1 billion allocated for shares in 2025 and 2026, contingent on achieving specific milestones. Additionally, Volkswagen will provide USD1 billion upon the joint venture’s foundation in 2024 and a further USD1 billion loan in 2026.

Volkswagen’s total investment in Rivian and the joint venture could reach up to USD5 billion by 2026, with USD2 billion expected to be paid out in 2024. This significant financial commitment has led Volkswagen to update its financial forecast for 2024, anticipating a net cash flow in the Automotive Division to range between EUR2.5 billion (USD2.6 billion) and EUR4.5 billion (USD4.8 billion), down from the previous forecast of EUR4.5 billion (USD4.8 billion) to EUR6.5 billion (USD6.9 billion).

Lars Korinth, head of Group Investor Relations at Volkswagen, emphasised the strategic importance of this investment in positioning Volkswagen at the forefront of electric vehicle technology and innovation.