Investing.com – German automaker Volkswagen (ETR:) announced a major investment plan in Rivian Automotive Inc (NASDAQ:), American manufacturer of electric vehicles (EVs).
The partnership, which could reach $5 billion in investment by 2026, aims to create a joint venture to share knowledge about electric vehicle architecture and software.
The news of the strategic partnership sent Rivian shares up 36.3% in after-hours trading.
The collaboration is expected to accelerate Volkswagen’s software-defined vehicle plans, with Rivian transferring its existing intellectual property rights to the joint ventures.
Rivian CEO Robert Scaringe said, “This partnership brings Rivian’s software and zone electronics platform to a broader market through the global reach and scale of the Volkswagen Group, while providing Rivian with an expected $5 billion in capital.”
The automotive industry currently faces unique challenges. While electric vehicle startups face shrinking demand due to high interest rates and limited funds, traditional automakers are trying to get into the production of battery-powered vehicles and advanced software.
Volkswagen’s first investment in Rivian will be $1 billion. This investment will be in the form of a convertible note, which will convert into an outright equity stake in Rivian, subject to receipt of the necessary regulatory approvals no earlier than December 1, 2024. The size of the shareholding will be determined by the average market price of Rivian shares. time of agreement and date of conversion.
In addition to direct investment, Volkswagen and Rivian plan to create a joint venture to develop the next generation of electric vehicle architecture. Both companies will equally control the joint venture, each owning 50% of the shares.
If successful, Volkswagen will have immediate access to Rivian’s current EV architecture technology for use in its own electric vehicles. However, the establishment of a joint venture is subject to several factors such as technical feasibility analysis, further negotiations, regulatory approval and achievement of certain milestones.
The final decision on creating a joint venture has not yet been made.
If the joint venture is successful, Volkswagen plans to invest an additional $4 billion in either Rivian shares or the joint venture.
Volkswagen will also provide a $1 billion payment upon the formation of the joint venture in 2024, followed by a $1 billion loan in 2026. If the joint venture is successfully implemented and further milestones are achieved, Volkswagen’s total investment in Rivian and the joint venture could increase. by 2026 will be $5 billion.
This could result in a payment of $2 billion in fiscal year 2024.
The proposed transaction could result in an unexpected cash outflow of up to €2 billion in the current financial year. As a result, Volkswagen is revising its financial forecast for the 2024 financial year.
The automaker now forecasts that the auto division’s net cash flow will be between 2.5 billion euros and 4.5 billion euros, down from the previous forecast of 4.5 billion euros to 6.5 billion euros.