Volkswagen, the German automaker, said Tuesday it would invest up to $5 billion in Rivian, an electric truck maker that has struggled to turn a profit, and that the two companies would cooperate on software for electric vehicles .
The deal creates an unusual alliance between the world’s second-largest automaker and an electric vehicle startup that has struggled to meet the expectations of investors who wanted the kind of success that made Tesla the most valuable automaker in the world.
If successful, the partnership would address the weaknesses of both companies. This would provide Volkswagen with the software expertise that auto analysts say it is sorely lacking. And Rivian, in addition to its cash, would benefit from the manufacturing expertise of an automaker that produces nearly 10 million vehicles a year in factories around the world.
Volkswagen said it would initially invest $1 billion in Rivian and then increase that amount to $5 billion over time. This infusion represents a great vote of confidence in Rivian, which loses tens of thousands of dollars on every vehicle he sells.
Rivian’s pickup trucks and sport utility vehicles have received rave reviews in the automotive press, but the company has struggled to gain traction. manufacturing in its factory in Normal, Ill.
Shares of Rivian jumped 35 percent in extended trading Tuesday after the deal was announced.
The electric vehicle market has been split between companies like Tesla and Rivian, which only make battery-powered cars, and established automakers like Volkswagen, General Motors and Toyota, which often struggle to get to grips with new technology.
With the exception of Tesla, none of the new U.S. automakers specializing in electric vehicles have captured significant market share. Some, like Fisker And Lordstown Motorsstopped production and filed for bankruptcy protection.
Auto analysts have long considered Rivian one of the most likely electric vehicle startups to survive, in part because it has raised billions of dollars in investment. Amazon is one of its largest shareholders and the main customer for the company’s delivery vans.
Ford Motor was a major shareholder in Rivian for a while, and the two companies once announced that they would build SUVs together. But that plan never came to fruition, and Ford sold most of its Rivian stock.
Rivian has recently tried to cut costs: in March, it delayed construction projects indefinitely. a $5 billion factory near Atlanta – in an effort to survive long enough to release an SUV costing around $45,000.
The cheapest vehicle the company currently sells, the R1T pickup, starts at around $70,000, a price that has limited its sales to wealthy early adopters. Its SUV, the R1S, starts at $75,000. Even at those prices, Rivian lost $39,000 for every vehicle sold in the first three months of the year.
Vehicles using software developed by the new joint venture will go on sale in the second half of the decade, Volkswagen said. The two companies will continue to market their vehicles separately.
This is a developing story. Check back for updates.
