Volkswagen Group is reportedly planning to invest nearly $5 billion in Rivian, an EV manufacturer based in US. This will eventually become a part of the new and equally controlled joint venture for sharing EV architecture and software.
As per a report by Reuters, this investment will help the EV maker in developing more affordable R2 SUVs and upcoming R3 crossovers, set for release by early 2026.
Post announcement, Rivian's share price witnessed a massive 50 per cent rise in extended trade. This has pushed the company's market value by nearly $6 billion, if the gains continue today.
This news comes at a time when EV startups are facing a decline in demand, high interest rates, and a gradual fall in cash reserves. Meanwhile, traditional automakers are grappling with issues in developing battery-powered vehicles and advanced software.
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Volkswagen will initially invest $1 billion in Rivian via a convertible note that will convert to stock on December 1, pending regulatory approval. Alongside this, the German automaker will make a $1 billion payment when the joint venture begins, which is expected in the fourth quarter of this year.
Despite facing losses of around $40,000 per vehicle delivered, Rivian has maintained a more stable financial position as compared to other EV startups, some of which have had to cut prices to boost demand or declare bankruptcy, such as Fisker recently.
Rivian has implemented cost-cutting measures while prioritizing the timely delivery of its EVs. This includes renegotiating supplier contracts and bringing certain components in-house.
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It has also revamped its manufacturing processes, resulting in some reductions in material costs.
Meanwhile, earlier this year, Volkswagen reaffirmed its commitment to introduce 25 EV models across its group brands in North America by 2030, despite a visible slowdown in segment growth.
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