Volkswagen launches $5.8bn tie-up with Tesla rival Rivian

Volkswagen Group (VW) and electric vehicle (EV) maker Rivian have announced the launch of a joint venture, with the German automaker increasing its investment in the partnership.

The deal is now valued at $5.8 billion (£4.55 billion), up from VW’s initial commitment of $5 billion.

Shares in Rivian surged more than 9% in after-hours trading following the announcement.

The partnership will allow the companies to share key technologies as global demand for electric cars slows and competition from Chinese rivals intensifies.

The joint venture provides much-needed funding to the loss-making Rivian, which is preparing for the launch of its R2 model—a more compact and affordable SUV compared to its current offerings.

Additionally, VW will be able to integrate Rivian’s technology into its own vehicle lineup, with the first VW models featuring Rivian technology expected to reach customers by 2027.

“By combining their complementary expertise, the two companies plan to reduce development costs and scale new technologies more quickly,” the two companies said in a statement.

Under the plan, developers and software engineers from both firms will initially work side by side in California, while three other facilities in North America and Europe will be set up.

It comes as expectations have grown that VW, Europe’s biggest car maker, is planning to announce major cost-cutting measures.

The Volkswagen Group, which includes brands such as Audi, Lamborghini, and Porsche, has been facing challenges such as rising costs, declining sales, competition from Chinese EV manufacturers, and a slower-than-expected transition away from petrol and diesel vehicles.

In a separate development, Rivian has been taking steps to reduce costs amid weaker demand for electric vehicles.

The startup, which has yet to achieve profitability, has been renegotiating contracts with suppliers and improving the efficiency of its manufacturing processes.

In addition to SUVs, Rivian also produces electric delivery vans, primarily supplied to Amazon, its largest shareholder. Amazon has placed an order for 100,000 of these vehicles, with all deliveries expected to be completed by the end of the decade.