Volkswagen doubles down on Rivian and raises investment to USD 5.8 billion

Volkswagen has announced a significant increase in its investment in the U.S. EV startup Rivian. The two companies have now kicked off their planned joint venture to develop advanced electrical infrastructure and Rivian's software technology for future EVs across all relevant vehicle segments.

Volkswagen's investment in Rivian has now reached USD 5.8 billion, a 16% increase from the initial USD 5 billion commitment announced in June. This latest cash infusion is a lifeline for the loss-making EV startup, which is gearing up to roll out a smaller, cheaper SUV called R2 amid high borrowing costs and slowing EV demand.

"This partnership and this deal secures the capital for us to ensure that we can't only take Rivian through the launch of R2 at Normal, but secures the launch of and growth of R2 in our Georgia facility and through (to being) cash flow positive for us as a business," said Rivian CEO RJ Scaringe in a statement to reporters.

The R2, which will be the first vehicle to use the new architecture developed through the joint venture, is expected to be produced at Rivian's factory in Normal, Illinois. The company has, however, delayed the construction of its plant in Georgia, applying for a federal loan last month to start building the facility.

The joint venture, named Rivian and VW Group Technology LLC, aims to integrate advanced electrical infrastructure and Rivian's software technology for future EVs of both companies. This collaboration could help ease the German automaker's problems with its own software unit, Cariad, which has been plagued by delays and losses since its inception, according to industry analysts.

Volkswagen plans to invest the USD 5.8 billion in Rivian and the joint venture by 2027, including an initial USD 1 billion convertible note. The Audi-parent will also invest USD 1.3 billion for intellectual property licences and an equity stake, as well as up to USD 3.5 billion in future equity, notes, and debt, all tied to specific milestones.

The joint venture will be led by Rivian's Chief Software Officer, Wassym Bensaid, and Volkswagen Group's Chief Technical Engineer, Carsten Helbing. Developers and engineers in the JV will be based initially in Palo Alto, California, with three additional sites under development.

The partnership is expected to bear fruit in the near future, with plans to launch Rivian's R2 in the first half of 2026 and potentially debut Volkswagen Group models as early as 2027.

The move comes at a critical time for both companies, as they navigate the rapidly evolving EV market. For Rivian, the additional funding and collaboration with a major automaker like Volkswagen could provide the stability and resources needed to weather the current challenges facing the EV industry. For Volkswagen, the partnership represents a strategic investment in securing its own electric future, leveraging Rivian's expertise in software and electrical architecture.

Investors have reacted positively to the news, with Rivian's shares rising nearly 9% in extended trading on Tuesday. The increased investment from Volkswagen is a testament to the German automaker's confidence in Rivian's potential and the two companies' shared vision for the future of electric mobility.