Electrifying Alliance: Volkswagen and Rivian’s Multi-Billion Dollar Bet on EV Future

Renowned German automaker, Volkswagen, is struggling in the electric vehicle (EV) market. The company has decided to invest up to $5 billion in American EV startup, Rivian.

Volkswagen officially announced the news on June 25, shortly after the New York Stock Exchange closed. Following the announcement, Rivian’s stock surged over 55% in after-hours trading and closed nearly 9% higher in regular trading.

The British BBC reported that Volkswagen’s investment is aimed at Tesla and BYD, who currently dominate the EV market in the U.S. and China, respectively.

Volkswagen is currently producing EVs and striving to pioneer the EV market. However, it has not been able to become a major player due to industry leaders such as Tesla and BYD.

The BBC analyzed that Volkswagen seems to be planning to enter the EV market by utilizing Rivian, which is already mass-producing EVs. Volkswagen plans to initially invest $1 billion in Rivian, with a total investment of $5 billion.

Volkswagen plans to secure a stake in Rivian through a convertible bond acquisition with an initial investment of $1 billion. Currently, the largest shareholder of Rivian is the e-commerce company Amazon, with a stake of 16%. The majority shareholder is expected to change with Volkswagen’s $1 billion investment.

Volkswagen plans to establish a joint venture with Rivian by investing an additional $4 billion.

Volkswagen and Rivian announced, “The joint venture will be jointly controlled and owned. We will jointly develop vehicles powered by next-generation batteries and vehicle software.”

Listed on the New York Stock Exchange in 2021 and once called a Tesla rival, Rivian has yet to turn a profit.

Consequently, Rivian’s stock price, which once reached $129, has fallen below $10 this year. Considering the situation, Rivian is expected to escape its financial difficulties by partnering with Volkswagen.