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Written by: Susannah Streeter | Hargreaves Lansdow
Volkswagen Group and Rivian announce a joint venture with VW increasing investment
- The two companies say the deal is now worth $5.8bn.
- The deal will involve the companies sharing know-how and technology.
- Shares in Rivian jump in pre-market trading.
Volkswagen is diversifying and using its financial firepower to build up its position in the US EV market through its tie-up with Rivian. Today’s announcement marks an increase on the $5 billion investment already announced by VW in the electric vehicle maker, which is still loss-making but has been restructuring and cutting costs to become more efficient, and this strategy has shown signs of progress.
It is a vote of confidence in the EV maker’s prospects, as support for EVs in the US faces a more uncertain future, given Trump is returning to the White House. Tesla’s Elon Musk has been given a seat at Trump’s top table, with concerns that this could put the EV makers rivals like Rivian in a less favourable position in terms of future policy decisions.
Shares jumped on the news in pre-market trading, offering relief given worries percolating that Trump will roll-back support and subsidies for the sector, which Rivian has benefitted from. This includes potentially unravelling the $2 billion grant programme the Biden administration offered to help small and medium sized manufacturers to upgrade facilities to produce components for EVs. Rivian has applied for financial support through the inflation reduction act and has benefited from state help in Illinois. As Tesla’s Elon Musk gain.
For VW, the deal is a way to tap into EV demand in the world’s largest economy, which has been slower than hoped but is expected to accelerate. It gives VW access, in particular, to a slice of the pick-up truck market and will boost its share of the SUV business. But it’s Rivian’s software which may be the bigger draw, with plans to integrate it into VW’s off-road EV brand, Scout. Its own software division, Cariad, has hit a series of bumps in the road, from budgetary overspend to technological difficulties with the EV architecture, and it’s hoped this new partnership will help speed up software innovation for VW and Rivian.
Joining forces in this way may also help lower the cost-per-vehicle and bolster defences against the growing might of Chinese EV makers. Rivian is very much on the back foot while trying to grab a bigger slice of the market from Tesla, despite a funding injection from Volkswagen, and there will be concerns that fresh state aid may dry up under the new Trump administration. Rivian is also not prioritising self-drive technology so would not benefit like Tesla and Lucid if faster approval is granted.