By Akash Sriram and Abhirup Roy
(Reuters) -Volkswagen Group raised its investment in Rivian by 16% to $5.8 billion, the two automakers said on Tuesday, as the companies kick off their planned joint venture to develop electric vehicle architecture and software.
Shares in the U.S. EV maker, valued at over $11 billion, rose nearly 9% in extended trading on Tuesday.
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The companies said in June that VW would invest $5 billion in Rivian – a lifeline for the loss-making EV startup that is gearing up to roll out a smaller, cheaper SUV called R2 amid high borrowing costs and slowing EV demand.
“This partnership and this deal secures the capital for us to ensure that we can’t only take Rivian through the launch of R2 at Normal, but secures the launch of and growth of R2 in our Georgia facility and through (to being) cash flow positive for us as a business,” Rivian CEO RJ Scaringe told reporters.
R2, the first vehicle to use the new architecture, will be made at its factory in Normal, Illinois. The company has delayed the construction of its plant in Georgia, applying for a federal loan last month to start building the factory.
New vehicles from VW unit Scout Motors vehicles will also be among the first to use the new architecture.
The joint venture – named Rivian and VW Group Technology LLC – aims to integrate advanced electrical infrastructure and Rivian’s software technology for future EVs of both companies, across all relevant vehicle segments, including subcompact cars, the firms said.
Volkswagen plans to invest the $5.8 billion in Rivian and the joint venture by 2027, including an initial $1 billion convertible note.
The Audi-parent will invest $1.3 billion for intellectual property licenses and an equity stake and up to $3.5 billion in future equity, notes and debt, all tied to specific milestones.
The joint venture could help ease the German automaker’s problems with its own software unit, Cariad, which has been plagued by delays and losses since its inception, analysts have said.
The German automaker recently asked its workers to take a 10% pay cut, saying it was the only way the company could save jobs and remain competitive, after profits plunged and union bosses threatened strikes.
Rivian’s Chief Software Officer Wassym Bensaid and VW Group’s Chief Technical Engineer Carsten Helbing will lead the joint venture .
Developers and engineers in the JV will be based initially in Palo Alto, California with three additional sites under development.
The joint venture will use Rivian’s existing tech to launch Rivian’s R2 in the first half of 2026 and potentially debut Volkswagen Group models as early as 2027.
(Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Mohammed Safi Shamsi)
