Volkswagen surprises market with $1 billion stake in Rivian

Company News

by Glenn Dyer

Volkswagen has sprung a major surprise by acquiring a $1 billion stake in the struggling U.S. EV maker Rivian, making the German giant the latest major company to partner with the smaller U.S. rival.

VW plans to boost that investment to $5 billion through a joint venture to be set up by the two companies.

This move confirms that the world’s second-biggest carmaker remains a strong believer in EVs, unlike its large rival Toyota, which continues to support its regenerative hybrid technology and petrol/hydrogen technologies.

The news, released after trading had ended for the day, saw Rivian shares surge more than 44% in after-hours trading, ahead of an investor day briefing on Thursday. This followed a more than 8% rise in regular trading, which increased the company’s market value to $11.9 billion.

The shares are down 118% since the float in late 2021.

The VW investment will go a long way to settling market concerns about Rivian’s future.

Amazon and Ford were among the major shareholders when Rivian floated back in 2021, each holding around 12%. Rivian had a significant deal to produce 100,000 EV delivery vehicles—a contract that soon faded.

Ford sold most of its stake in 2022 and 2023, and Amazon wrote down its stake after substantial losses at Rivian. Amazon took a $12 billion paper profit when Rivian shares soared in the weeks after its float in 2021 but then was forced to write down more than $7 billion as Rivian shares fell sharply in early 2022.

Ford took a loss of $5.4 billion at the same time, and Amazon took another big loss in early 2023. The $1 billion capital infusion from VW will be in the form of a convertible note, which could be converted to Rivian shares on or after December 1.

Rivian reported a loss of $1.45 billion during the first quarter of this year as it retooled its plant in Normal, Illinois, to launch updated versions of its two key models ahead of its next-generation vehicles in 2026.

The company has been on a cost-cutting mission for months. It has trimmed staff, retooled its Illinois plant to increase efficiencies, and paused construction of a new multibillion-dollar factory in Georgia.

That was expected to save more than $2.25 billion in capital spending, including the impact of starting production of Rivian’s next-generation R2 vehicle at its plant in Illinois.

Rivian had $7.86 billion in cash and short-term investments at the end of March, with more than $9 billion in total liquidity.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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