Rivian, a U.S. company primarily producing electric pickup trucks and SUVs, has secured an investment of $5 billion from Volkswagen. This amount represents more than half of Rivian’s liquid assets, which stand at $9 billion. Struggling with a cash crunch, Rivian plans to accelerate the development and launch of new low-cost vehicles starting at less than $70,000, thanks to Volkswagen’s investment.
Volkswagen announced on June 25 that it would begin with a $1 billion investment and plans to invest up to $5 billion by 2026. Volkswagen will initially invest $1 billion each in the next year and 2026. It also plans to invest $2 billion in a joint venture to develop electric vehicles (EV) and EV software technology in 2026.
This investment provides Rivian with a significant opportunity for growth. Rivian had previously focused on cost-cutting rather than developing new models due to a lack of liquidity. It laid off employees and halted the construction of a new factory in Georgia, which was expected to require billions of dollars in investment. Instead, Rivian retrofitted a factory in Illinois and began producing the SUV R2 vehicle there last March.
Its performance was also on a downward trend. This was due to sluggish sales of its main models, the R1S (SUV) and R1T (pickup truck). As a result, Rivian recorded a net loss of $5.4 billion last year. The scale of the net loss in the first quarter of this year alone was $1.45 billion. Rivian’s cash and cash equivalents were only $9 billion as of the end of March.
Rivian CEO RJ Scaringe said, “We now have enough operational funds to become a cash-generating company.”
Volkswagen’s investment has sparked anticipation among Rivian shareholders. Rivian’s stock price has fallen about 49% since the beginning of the year. However, Rivian’s stock price rose nearly 9% in regular trading to $11.96 on the day of the announcement. It surged by about 40% in after-hours trading.
Volkswagen’s investment in Rivian comes as traditional automakers are changing their strategies due to the slower-than-expected spread of EVs in the U.S. market.
It remains uncertain how Volkswagen’s investment will impact the planned $2 billion construction of a truck and SUV factory in South Carolina.
When Rivian went public in 2021, Ford was the largest shareholder, holding a 12% stake along with Amazon. However, Ford sold all its Rivian shares last year after abandoning plans to jointly develop EVs with Rivian.
