Volkswagen announced plans to invest $5bn (£3.9bn), or up to 9% of its total revenue, in Rivian’s US electric carmaker. This comes as manufacturers are rethinking their strategies due to uncertain demand.
The German automaker said that it would initially give $1bn to Rivian. Rivian aims to compete against Tesla by offering “electric adventure vehicles”.
The joint venture gives VW immediate access Rivian’s technology and opens the door to a further investment of $4bn by 2026.
Both companies have said that the new venture would be “equally owned and controlled” by VW as well as Rivian.
The announcement comes at a time when the electric vehicle sector is facing challenges due to a weakening of demand and heightened risk of a possible trade war with China.
In recent weeks, both the European Union (EU) and the United States have announced that they will impose Tariffs on Chinese Electric Vehicles.
German automakers have opposed tariffs, fearing that China will retaliate with measures that would harm manufacturers like BMW and Daimler.
Erik Gordon, professor at University of Michigan Ross School of Business told Bloomberg, “the cost of going it alone is just too high.”
The carmakers have had to reduce production due to a decline in sales and high prices.
Ford is one of the companies that has reduced its spending on EVs and delayed new battery-powered factories and models by $12bn.
General Motors said recently that it could take “decades’ for the EV industry to develop.
Mary Barra told NBC in early February: “We committed to a future powered by electric vehicles back in 2018.” As we transform, this will take decades. “I couldn’t be prouder of our gas-powered vehicles as well.”
Rivian shares surged 50pc on premarket trading in US following the deal. Some analysts called it a lifeline to the business.
Rivian shares have fallen more than 90% since listing on Nasdaq 2021.
Tesla, owned by Elon Musk, has lost over a fifth of its worth in the last year.
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