Volkswagen disclosed Tuesday it would invest $1 billion in Irvine, Calif.-based electric vehicle maker Rivian, with plans to ramp up to as much as $3 billion over the next few years. VW is aiming to bolster an ambitious, but struggling software development program. Rivian stock rocketed more than 42% in after-hours trade.
The Wall Street Journal reported the story late Tuesday that the Wolfsburg, Germany, headquartered VW announced plans to also invest $2 billion in a jointly-owned software developer based on Rivian's products. The result will be used in both Volkswagen and Rivian vehicles. The report noted that VW's software unit had wrestled with quality issues.
All told, Volkswagen said it plans to invest up to $5 billion in Rivian and the software joint venture.
In late May, Morgan Stanley's high-profile autos analyst Adam Jonas met with Rivian management. He wrote that Rivian was "uniquely positioned within autos (other than Tesla) on scaling a fully integrated software stack critical to unlocking the AI opportunity."
"At a market value 1/60 that of Tesla," Jonas added, "the stock's direction is a balance of dilution risk vs. potential strategic partner rerate."
VW Pledges $5 Bil, Rivian Stock Soars
On Tuesday, Rivian Chief Executive RJ Scaringe told the Wall Street Journal that the VW influx would bolster his company long enough to become a cash-generating business. Spreading the cost of software development over a larger fleet of vehicles was also key, he said.
Rivian had previously decided to delay plans for a new factory in Georgia. The plant would save around $2 billion on the launch of Rivian's next vehicle, the R2 SUV. In March, Rivian had introduced a smaller, cheaper, next-generation vehicle and platform dubbed the R2. It had an estimated starting price of $45,000, and was expected to qualify for the $7,500 Inflation Reduction Act (IRA) tax credit.
Earlier this year, the Taiwan-based Digitimes reported Apple could be exploring a partnership with Rivian. Apple had canceled its long-running "Project Titan" Apple Car in late February.
Rivian shares bolted more than 42% higher in late trade Tuesday. The stock has been largely in a downtrend for the past 12 months, ending Tuesday down 49% so far this year.
Volkswagen's American depositary receipts were unchanged, after ending Tuesday's session with a fractional gain. Volkswagen stock is down about 7% since the start of the year.
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