Volkswagen, the German automaker, said Tuesday that it would invest up to $5 billion in Rivian, an electric truck maker that has struggled to turn a profit, and that the 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 live up to investor expectations that it would achieve the kind of success that made Tesla the most valuable automobile manufacturer in the world.
If successful, the partnership would address weaknesses of both companies. It would provide Volkswagen with software expertise that automotive analysts say it lacks. And Rivian, in addition to the cash, would benefit from the manufacturing expertise of an automaker that produces nearly 10 million vehicles a year, putting it just behind Toyota Motor in the global auto industry.
Volkswagen said it would initially invest $1 billion in Rivian and would eventually increase that figure to $5 billion. If regulators approve the transaction, Volkswagen could become a major shareholder. The infusion represents a huge vote of confidence in Rivian, which loses tens of thousands of dollars on every vehicle it sells.
Rivian's trucks and sport utility vehicles have received glowing reviews in the automotive press, but the company has struggled to ramp up manufacturing at its factory in Normal, Illinois. In recent months, many investors have worried that the company will not survive long enough to become profitable.
RJ Scaringe, Rivian's founder and chief executive, said Volkswagen's cash would help Rivian launch a midsize SUV called the R2 that will sell for about $45,000 and complete a factory in Georgia. Rivian halted construction of the Georgia plant in March in an effort to save more than $2 billion.
“This is important for us financially,” Scaringe said of the partnership with Volkswagen in a conference call with reporters on Tuesday.
The cheapest vehicle Rivian currently sells, the R1T pickup truck, costs around $70,000, a price that has limited its sales to wealthy early adopters. Its R1S SUV starts at $75,000. Even at those prices, Rivian lost $39,000 for each vehicle it sold in the first three months of the year.
Rivian shares rose more than 50 percent in extended trading Tuesday after the deal was announced.
The electric vehicle market has been divided between relatively young companies like Tesla and Rivian, which only make battery-powered cars, and established automakers like Volkswagen, General Motors and Toyota, which have often struggled to master the new technology.
With the exception of Tesla, none of the new American automakers specializing in electric vehicles have gained significant market share. Some, such as Fisker and Lordstown Motors, ceased production and filed for bankruptcy.
Automotive analysts have long considered Rivian among the electric vehicle startups most likely to survive, in part because it has raised billions of dollars in investments. amazon is one of its largest shareholders and the largest customer of the company's delivery vans.
But Volkswagen and Rivian operate very differently and it could be a challenge for them to work together. Volkswagen, based in Wolfsburg, Germany, is known for its rigid, top-down management and is partly owned by the state of Lower Saxony. Rivian, based in Irvine, California, has the freest culture of a tech startup. Rivian said in April that it expected to sell 57,000 vehicles this year, far less than Volkswagen sells in a week.
Scaringe and Oliver Blume, Volkswagen's chief executive, said the deal blossomed after the two met at a Porsche customer center and bonded over their love of cars.
“We have a very similar mindset,” Blume said during the conference call.
Ford Motor was for a time a large shareholder in Rivian, and the two companies once said they would build SUVs together. But that plan never came to fruition and Ford sold most of its Rivian shares. Ford and Volkswagen have a separate partnership that includes joint development and production of electric vehicles.
The Volkswagen-Rivian alliance could encourage other established automakers to consider investments or partnerships that connect them with startups like Lucid Motors, companies that have well-regarded technology but are unprofitable and struggling to establish themselves in a saturated market. Another major automaker, Stellantis, parent company of Chrysler, Fiat and Peugeot, has invested in a Chinese company, Leapmotor, to access its electric car technology.
Volkswagen has announced that vehicles using software developed by the new joint venture will go on sale during the second half of the decade. Any of Volkswagen's brands, including Audi and Porsche, could use the technology, according to Blume. Scout, the American off-road vehicle brand that Volkswagen is bringing back at a factory under construction in South Carolina, could also use the software.
But Volkswagen and Rivian will continue to market their vehicles separately.
