Rivian has entered into a joint venture with Volkswagen, which will see the German car giant invest billions of dollars into the electric vehicle firm.
In the equally controlled and owned joint venture, Volkswagen will invest an initial $1 billion in Rivian, with up to $4 billion in planned additional investment.
Essentially, Rivian's hardware design and integrated technology platform is expected to serve as the foundation for future SDV development in the JV that will be applied to both companies' vehicles.
Rivian also plans to contribute its electrical architecture expertise and is expected to license existing intellectual property rights to the joint venture.
Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade, the two firms stated.
Initially Volkswagen Group will invest $1 billion in Rivian through an unsecured convertible note that will convert into Rivian's common stock.
Volkswagen Group is expected to invest a further $4 billion as part of the transaction.
The investment will provide Rivian the funding necessary to develop its less expensive and smaller R2 SUVs that are set to roll out in early 2026 and its planned R3 crossovers, CEO RJ Scaringe was quoted as telling Reuters.
The partnership will enable Rivian to cut operating costs by utilising volumes of supplies including chips and components, he reportedly said.
It will also reportedly help Rivian turn cashflow positive.
The company will license its existing intellectual property to the JV, and the R2 will be the first vehicle using software from the JV. Volkswagen vehicles, including its Audi, Porsche, Lamborghini and Bentley brands, will follow, Reuters reported.
Volkswagen said on Tuesday the Rivian software will also be used by the German carmaker's off-road EV brand Scout.
Volkswagen is also expected to benefit, after Reuters reported analysts and investors as viewing the investment as a move to solve the company's software struggles.
VW's software division, Cariad has reportedly exceeded its budget and failed to meet goals.
Shares of Rivian surged about 50 percent in extended trade after the announcement, potentially boosting the company's market value by nearly $6 billion, if gains hold on Wednesday.
There is no getting around the fact that the EV sector is facing a troubling period, with EV makers struggling with a slowdown in demand, coupled with high interest rates and a spending squeeze around the world.
Rivian was hit particularly hard, and in an effort to keep going it has been slashing costs, letting go 6 percent of its workforce in early 2023.
Reuters also noted that Rivian has also been renegotiating supplier contracts and building some parts in-house.
It has also reportedly overhauled its manufacturing process, which has led to a significant reduction in cost of materials, Scaringe told Reuters last week.
This Cyber News was published on www.silicon.co.uk. Publication date: Wed, 26 Jun 2024 19:13:05 +0000