Volkswagen is throwing Rivian Automotive a $5 billion lifeline, forming a joint venture with the Irvine-based electric-vehicle startup that has struggled to produce its vehicles amid rising costs and declining demand.
VW announced the joint venture on Tuesday, June 25, saying its initial $1 billion investment, an unsecured convertible note that turns into Rivian shares on or after Dec. 1, would go toward creating next-generation software and architecture for EVs.
Each company will hold a 50% stake in the venture, controlling each equally.
Also see: Tesla recalls Cybertrucks twice in a day to fix windshield wipers, loose trim
Rivian said the pact would enable both companies to produce vehicles at a lower cost by increasing scale and innovation. VW is expected to invest another $4 billion with Rivian, with new vehicles expected in the latter half of the decade.
“Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it’s exciting that one of the world’s largest and most respected automotive companies has recognized this,” RJ Scaringe, founder and CEO of Rivian, said in a statement.
More on autos: Ford recalls over 550,000 pickups because transmission can suddenly downshift to 1st
Scaringe said the money VW is investing will help the Irvine automaker secure capital needs for “substantial growth.”
Rivian shares soared in after-hours trading, rising 30%, but are down 49% for the year.
The automaker has struggled in the past year, laying off scores of people across several divisions. Last month, it laid off 1% of its workforce, the second round of layoffs this year.
“We continue to work to right-size the business and ensure alignment to our priorities,” the company said in early May. “This was a difficult decision, but a necessary one to support our goal to be gross margin positive by the end of the year.”
The company’s May layoffs came two months after Rivian slashed 10% of its salaried staff. Previous rounds went after product teams as Rivian cut staff working on its commercial EV business.
More on EVs: California EV sales hit record level while other states seem to lose interest
Rivian, like many other automakers in the EV sector, has seen a stall in vehicle demand after a surge of buying in the past five years. Sales of EVs grew only 3.3% in the first quarter of 2024, well below the 47% growth that helped fueled record sales and a 7.6% market share in 2023.
The EV share of total U.S. sales fell to 7.15% in the first quarter.
Tesla in April said it would cut 10% of workers after dismal sales so far this year. A year ago, the company laid off 239 workers at Costa Mesa and Tustin operation centers.
A year ago April, Rivian cut 239 workers in Orange County as it culled the company’s workforce by 6%. It also cut 240 jobs in the Bay Area that month.
Rivian, which saw early investments from Amazon and Ford Motor Co., also halted its plans to build a production facility in Georgia. Instead, the automaker is expanding its Normal, Ill., facility with help from state tax incentives. The company said it’s getting incentives valued at $827 million.
VW produces as many as 10 million vehicles a year. Rivian, as a startup, produced just over 57,000 EVs in 2023.
Bloomberg and The Associated Press contributed to this report.
