Why VW investing $5 billion in Rivian might be transformative for both companies — and the auto industry

Electric truck maker Rivian’s $5 billion deal with Volkswagen Group nets Rivian some much-needed cash. But it also gives Volkswagen a path to a future in the auto industry it has struggled to gain on its own.

In its short lifespan, Rivian has enjoyed praise from the automotive press, received chart-topping customer satisfaction ratings, gone through one of the biggest initial public offerings of all time, and watched its market value swell to $150 billion.

But since then, Rivian’s shares have plummeted. As of the second quarter, Rivian was losing somewhere around $1.5 billion per quarter — or about $30,000 to $43,000 on every truck it sold in the past five quarters.

“They are potentially one or two programs [new models] away from bankruptcy,” said Joe McCabe, president and CEO of AutoForecast Solutions.

And with prices that typically start around $70,000, Rivian’s trucks are not cheap.

Financial strain and instability in the EV market and the broader economy have led to multiple rounds of layoffs at Rivian. In March, the automaker announced it would pause work on a $5 billion factory in Georgia where it had plans to produce its next generation of vehicles. 

Then in late June, VW Group — the second-largest automaker in the world by volume — swooped in with a planned investment of $5 billion in the cash-strapped EV maker through 2026.

The nick-of-time deal is expected to result in some kind of joint venture as early as this fall.

“I think that this deal ended up being really consequential for Rivian, for Volkswagen, but I think maybe even for the industry as a whole,” said Alex Potter, senior analyst at Piper Sandler.

But there are still challenges: Automotive history is littered with failed partnerships, Rivian and VW are still competitors, and the EV transition has proven rockier than many forecasters had expected.

Watch the video to learn more.