German carmaker Volkswagen Group (VW) and American electric vehicle (EV) maker Rivian have jointly announced a new partnership. VW has increased its investment in the joint venture to a current valuation of $5.8 billion (approximately £4.55 billion), up from an initial investment of $5 billion.
Following this landmark announcement, Rivian’s shares rose more than 9% on the US stock market. Through this partnership, both companies will work to develop new technologies in the field of EVs through technical cooperation.
The partnership is crucial for Rivian as the company needs capital for the launch of its new R2 model SUV. The R2 is a smaller and more affordable vehicle from Rivian and is expected to hit the market in 2025.
The collaboration will allow VW to use Rivian’s technology in its new models. The first VW vehicles built using this technology will be available to customers by 2027.
“The synergy between the two companies’ expertise will reduce development costs and enable the rapid advancement of new technologies,” VW and Rivian said in a joint announcement.
Under the plan, engineers and software developers from VW and Rivian will work together in California, while three more facilities will be established in North America and Europe.
Following the announcement, Volkswagen is rumored to be planning major cuts to control its costs in Europe. VW is facing challenges due to high costs, declining sales, and increased competition from Chinese EV makers.
Rivian is also cutting costs during this period as demand in the EV market continues to decline. The company has revamped its contracts with suppliers and taken steps to streamline manufacturing processes.
Apart from SUVs, Rivian also manufactures EV delivery vans, with its major buyer being Amazon. Amazon has ordered 100,000 vehicles from Rivian, which is expected to be delivered by the end of the decade.
With this new tie-up, the two companies are determined to work together to overcome the growing competition in the electric vehicle market and the slowdown in global demand.