Volkswagen invests up to $5 billion in Rivian to form joint venture

Volkswagen has announced a substantial investment in Rivian, with the German automaker committing an initial US$1 billion (C$1.35 billion), with the potential for the total investment to grow to as much as US$5 billion (C$6.75 billion) by 2026.

The partnership aims to establish a joint venture focused on the development of next-generation electrical/electronic (E/E) architecture for EVs.

According to a press release from Volkswagen, the automaker has agreed to enter into a Convertible Promissory Note Purchase Agreement with Rivian, with Volkswagen granting Rivian a convertible note worth US$1 billion.

This investment will allow for the creation of a joint venture between the two companies to develop next-generation E/E architecture for EVs. Both Volkswagen and Rivian will hold equal 50% stakes, a move that will give Volkswagen immediate access to Rivian’s current E/E architecture technology.

However, the joint venture is contingent upon several factors, including the technical feasibility of integrating Rivian’s E/E architecture into Volkswagen vehicles, further negotiations between the parties, and obtaining regulatory approvals.

Should these conditions be met, Volkswagen plans to make additional investments in Rivian and the joint venture, potentially totaling US$4 billion (C$5.46 billion) over the following years.

That additional investment will include two US$1 billion tranches in Rivian shares in 2025 and 2026, contingent on the achievement of specific milestones. Additionally, Volkswagen will provide US$1 billion upon the foundation of the joint venture in 2024 and commits to a US$1 billion loan in 2026. By 2026, Volkswagen’s total investment could reach US$5 billion.

The announcement of this partnership has unsurprisingly had a positive impact on Rivian’s stock, with shares soaring by nearly 45% in after-hours trading, boosting the company’s market value to nearly US$12 billion (C$16.39 billion) at the time of publication.

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