Volkswagen, the German carmaker, said on Tuesday it would invest up to $5 billion in Rivian, an electric truck maker that has struggled to turn a profit, and that the companies would collaborate on software for electric vehicles.
The deal creates an unusual alliance between the world’s second-largest automaker and an electric vehicle startup that is meeting investors’ expectations that it will achieve the kind of success that has made Tesla the world’s most valuable automaker.
If successful, the partnership will address weaknesses in both companies. It would give Volkswagen the software expertise that auto analysts say it sorely lacks. And Rivian, in addition to cash, will benefit from the manufacturing expertise of an automaker that produces nearly 10 million vehicles a year, placing it just behind Toyota Motor in the global auto industry.
Volkswagen said it would initially invest $1 billion in Rivian and increase that to up to $5 billion over time. If regulators approve the transaction, Volkswagen could become a major shareholder. The infusion represents a big vote of confidence in Rivian, which loses tens of thousands of dollars on every vehicle it sells.
Rivian’s pickups and sport utility vehicles have received glowing reviews in the auto press, but the company has struggled to ramp up production at its plant in Normal, Ill. In recent months, many investors have worried that the company may not survive long enough to become profitable.
RJ Scaringe, Rivian’s founder and CEO, said the cash from Volkswagen would help Rivian launch a midsize SUV called the R2 that will sell for about $45,000 and complete a factory in Georgia. Rivian halted construction of the Georgia plant in March in an effort to save more than $2 billion.
“This is important for us financially,” Mr. Scaringe said of the Volkswagen partnership on a conference call with reporters on Tuesday.
The cheapest vehicle Rivian currently sells, the R1T pickup, starts at about $70,000, a price that has limited its sales to affluent early adopters. Its R1S SUV starts at $75,000. Even at those prices, Rivian lost $39,000 for every vehicle it sold in the first three months of the year.
Rivian’s stock jumped more than 50% in extended trading on Tuesday after the deal was announced.
The electric vehicle market has been split between relatively new companies like Tesla and Rivian, which make only battery-powered cars, and established automakers like Volkswagen, General Motors and Toyota, which often struggle to dominate new technology.
Except for Tesla, none of the newer American automakers specializing in electric vehicles has gained significant market share. Some, such as Fisker and Lordstown Motors, ceased production and filed for bankruptcy.
Auto analysts have long considered Rivian among the EV startups most likely to survive, in part because it has raised billions of dollars in investment. Amazon is one of its largest shareholders and the main customer for the company’s delivery trucks.
But Volkswagen and Rivian operate very differently and it could be a challenge for them to work together. Volkswagen, which is based in Wolfsburg, Germany, is known for its rigid, top-down management and is partly owned by the state of Lower Saxony. Rivian, based in Irvine, California, has the loosest culture of a tech startup. Rivian said in April it expected to sell 57,000 vehicles this year, far fewer than Volkswagen sells in a week.
Mr Scaringe and Oliver Blume, Volkswagen’s chief executive, said the deal blossomed after the two met at a Porsche customer center and bonded over their love of cars.
“We have a very similar mentality,” Mr. Blume said during the conference call.
Ford Motor was for a time a major shareholder in Rivian, and the two companies once said they would build SUVs together. But that plan never came to fruition and Ford sold most of its shares in Rivian. Ford and Volkswagen have a separate partnership that includes joint development and production of electric vehicles.
The Volkswagen-Rivian alliance could encourage other established automakers to consider investments or partnerships that link them with startups like Lucid Motors — companies that have good technology but are unprofitable and struggling to gain a foothold in a crowded market. Another major carmaker, Stellantis, the parent company of Chrysler, Fiat and Peugeot, has invested in a Chinese company, Leapmotor, for access to its electric car technology.
Vehicles using software developed by the new joint venture will go on sale in the second half of the decade, Volkswagen said. Any of Volkswagen’s brands, which include Audi and Porsche, could use the technology, Mr. Blume said. Scout, the American off-road brand that Volkswagen is reviving at a plant under construction in South Carolina, could also use the software.
However, Volkswagen and Rivian will continue to market their vehicles separately.
