Volkswagen to invest $5 bn in EV maker Rivian

German carmaker Volkswagen AG plans to invest up to $5 billion in U.S. electric vehicle maker Rivian Automotive by 2026 as two automakers look to create next-generation software-defined vehicle (SDV) platforms to be used in both companies’ future EVs.

Volkswagen and Rivian will each hold a 50% stake in the joint venture.

Under the terms of the agreement, Volkswagen will grant Rivian Automotive a convertible note in the amount of $1 billion. The note will convert into a direct shareholding of Volkswagen in Rivian Automotive. In case the joint venture would be established successfully, Volkswagen intends to make further investments in shares of Rivian or in the joint venture in the total amount of $4 billion. The additional investment in shares of Rivian would be made in two tranches of $1 billion each in 2025 and 2026 and would be contingent on Rivian and the joint venture achieving certain milestones.

This partnership is expected to help secure capital needs of Rivian.

Upon implementation of the joint venture, Volkswagen would receive immediate access to Rivian Automotive’s current E/E architecture technology for using it in its electric vehicles.

Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade. In the short term, the joint venture is expected to enable Volkswagen Group to utilise Rivian’s existing electrical architecture and software platform. The partnership’s ambition is to accelerate Volkswagen Group’s SDV plans and transition to a pure zonal architecture. Each company will continue to separately operate their respective vehicle businesses.

With respect to the joint venture Volkswagen would provide a payment in the amount of $1 billion upon foundation of the joint venture in 2024 and grant a loan in the amount of $1 billion in 2026. If the joint venture will be successfully implemented and certain further milestones are achieved, the total investment of Volkswagen in shares in Rivian as well as in equity and debt in the joint venture would aggregate in a total amount of $5 billion by 2026; a part of which in the amount of $2 billion would be paid out still in fiscal year 2024.

“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. We are also acting in the best interest of our strong brands, which will inspire with their iconic products. The partnership fits seamlessly with our existing software strategy, our products, and partnerships. We are strengthening our technology profile and our competitiveness,” says Oliver Blume, CEO of Volkswagen Group.