Volkswagen will invest $5 billion in California-based electric car maker Rivian over the next two years, the companies announced Tuesday. The deal is expected to increase funds for the Tesla rival—which reported a net loss of $5.4 billion in 2023—and lower the cost of its vehicles. It will also boost Volkswagen's software unit, "which has struggled with quality issues," per the Wall Street Journal. The German automaker said a $2 billion investment in 2026 would go toward the creation of a jointly owned software company that will use Rivian's vehicle technology, with developments being applied to later models of both companies' vehicles.
That comes on top of an initial $1 billion investment, to be followed by another $1 billion in each of 2025 and 2026. The partnership "is expected to allow both companies to combine their complementary strengths and lower cost per vehicle by increasing scale and speeding up innovation globally," according to a release. Shares of Rivian jumped roughly 40% in after-hours trading following the announcement. Shares had been down roughly 49% this year, per NBC News. Ford, a 12% stakeholder in Rivian when the company went public in 2021, exited a deal to co-develop EVs with the startup last year.
This new deal means Rivian will have the money to stay afloat long enough to generate positive cash flows, CEO RJ Scaringe told the Journal. Executives now say the company will report its first gross profit by the end of this year. By spreading the cost of software over many vehicles, it will also lower parts costs for Rivian, whose vehicles start at $70,000, Scaringe said. Before the tie-up with Volkswagen, Rivian had been cutting costs. It also postponed plans for a multibillion-dollar factory in Georgia. It instead overhauled its lone factory in Illinois and revamped its electric pickup trucks and SUVs to make them cheaper to produce. (More Volkswagen stories.)
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