German automaker Volkswagen Group (VOWG_p.DE) will invest up to $5 billion in U.S. electric-vehicle maker Rivian (RIVN.O) as part of a new, equally controlled joint venture to share EV architecture and software, the companies said on Tuesday.
Shares of Rivian surged 30% in extended trading on the Nasdaq after the announcement, boosting the company's stock market value by more than $3 billion.
The auto industry faces a crucial time as EV startups grapple with a slowdown in demand amid high interest rates and dwindling cash, while traditional automakers have struggled to build battery-powered vehicles and advanced software.
Volkswagen will initially invest $1 billion in Rivian and a further $4 billion in investments later, the companies said.
The investment will provide Rivian the funding necessary to develop its less-expensive and smaller R2 SUVs that are set to roll out in 2026 and its planned R3 crossovers, CEO RJ Scaringe told Reuters.
It will also help Rivian - currently known for its flagship R1S SUVs and R1T pickups - turn cash flow-positive.
The partnership will help Volkswagen accelerate plans to develop software-defined vehicles (SDV), with Rivian licensing its existing intellectual property rights to the JV.
Volkswagen said earlier this year it was sticking with plans to launch 25 EV models in North America across its group brands by 2030, even as it acknowledged slowing growth in the segment.
"Their recent cost-cutting was one thing to work on, but they were definitely going to need something to get them past the launch of the R2s. This definitely helps extend that range," said Sam Fiorani, vice president at research firm AutoForecast Solutions.
Rivian has been overhauling its manufacturing process, including removing equipment from its plant and parts from its vehicles, which has led to a 35% reduction in cost of materials for vans and savings of "similar magnitude" for its other lines, Scaringe told Reuters during an exclusive tour of its facility in Normal, Illinois, on Friday.
Traders have bet heavily that Rivian's stock will fall, with an equivalent of 18% of its shares recently sold short, according to data from S3 Partners.
