Volkswagen (VW) has launched a $5.8 billion tie-up with electric vehicle maker Rivian to share technology and reduce development costs. The partnership will enable VW to use Rivian’s tech in its own vehicles, starting from 2027, while providing crucial funding for Rivian as it prepares to launch its R2 model next year.
Background
Key Points
-
The two companies will share critical technology, reducing development costs and scaling new technologies more quickly.
-
Rivian, which has yet to turn a profit, receives crucial funding through the joint venture.
-
VW will use Rivian’s technology in its own range of vehicles, with the first models expected to be available as early as 2027.
Joint Venture Details
The tie-up involves developers and software engineers from both firms working side by side in California. Three other facilities in North America and Europe will also be set up as part of the plan.
Context for the Partnership
VW has been struggling with higher costs, weakening sales, competition from Chinese EV makers, and a slower-than-expected move away from petrol and diesel vehicles. Rivian has taken steps to cut costs amid softening demand for EVs, renegotiating contracts with suppliers and making its manufacturing processes more efficient.
Market Reaction
Shares in Rivian jumped more than 9% in after-hours trading following the announcement.
Expected Outcomes
The partnership aims to reduce development costs and scale new technologies more quickly. VW will be able to use Rivian’s technology in its own range of vehicles, with the first models expected to be available as early as 2027.
Financial Impact
Shares in Rivian jumped more than 9% in after-hours trading following the announcement. The joint venture provides a crucial source of funding for Rivian as it prepares for the launch next year of its R2 model, a sports utility vehicle (SUV) that is smaller and more affordable than its current offerings.
Quotes
“By combining their complementary expertise, the two companies plan to reduce development costs and scale new technologies more quickly,” said VW and Rivian in a statement.
Relevant Information
The joint venture comes as expectations have grown that VW is planning to announce major cost-cutting measures. The company has been struggling with higher costs, weakening sales, competition from Chinese EV makers, and a slower-than-expected move away from petrol and diesel vehicles.
Rivian, on the other hand, has taken steps to cut costs amid softening demand for EVs. It has renegotiated contracts with suppliers and made its manufacturing processes more efficient. The startup also makes electric delivery vans, which it supplies mainly to online retail giant Amazon – its largest shareholder. Amazon has ordered 100,000 of these vehicles, all due to be delivered by the end of the decade.
Source Information
-
Source URL: https://www.bbc.com/news/articles/c5yr90lmjpno
-
Author: Unknown Author
-
Published Date: November 13, 2024
