On the evening of June 25th local time, Volkswagen Group (hereinafter referred to as Volkswagen) and Rivian Automotive (hereinafter referred to as Rivian) jointly announced the establishment of a joint venture to jointly develop the electronic/electrical architecture of the next generation of electric vehicles.
It is reported that the new joint venture will be 50% owned by Volkswagen and Rivian respectively, with equal control rights. The related delivery is expected to be completed in the fourth quarter of 2024. Once the joint venture is successfully implemented, Volkswagen will obtain access to Rivian's current electronic/electrical architecture for use in Volkswagen's electric vehicles. On the basis of its strategic partnership, Volkswagen will invest $1 billion in Rivian and plans to add an additional $4 billion, with an expected total transaction size of $5 billion.
According to information disclosed by Rivian, Volkswagen's initial $1 billion investment will be in the form of unsecured convertible bonds, which can be converted into Rivian's equity.
Volkswagen stated that according to the terms of the agreement, it will issue convertible bonds worth $1 billion to Rivian. After obtaining necessary regulatory approval, the bond will be converted into direct equity of Volkswagen in Rivian. The shareholding ratio of shareholders will be determined based on Rivian's average stock price, with half of the equity interests determined at the time of signing the convertible promissory note purchase agreement and the other half of the equity interests determined on the conversion date.
If the joint venture can be successfully established, Volkswagen plans to invest a total of $4 billion in Rivian between 2024 and 2026, or invest in the joint venture. Among them, the investment in Rivian will be divided into two installments, each worth $1 billion, to be made in 2025 and 2026 respectively. For the joint venture, Volkswagen will provide $1 billion in funding upon its establishment in 2024 and a $1 billion loan in 2026. If the joint venture can be successfully established and achieve good development, by 2026, Volkswagen's equity and debt investments in Rivian and the joint venture will accumulate to $5 billion, of which $2 billion will be paid in fiscal year 2024.
Based on this, Volkswagen stated that the announced transaction may result in an additional cash outflow of 2 billion euros for this fiscal year. Therefore, Volkswagen has also updated its financial forecast for the 2024 fiscal year, stating that in the automotive sector, Volkswagen currently expects its net cash flow to be between € 2.5 billion and € 4.5 billion (previously between € 4.5 billion and € 6.5 billion), and net liquidity to be between € 37 billion and € 39 billion.
Rivian stated that the cooperation aims to focus on the design and development of software, electronic control units, and related network architectures. Volkswagen plans to start using Rivian's regional ECU architecture and other technologies in 2026. "Through this cooperation, the two companies will strive to achieve further cost savings and improve customer experience," Rivian said.
According to public information, Rivian was founded in 2009 as an American electric vehicle manufacturer, once known as the "Tesla Killer". It landed on NASDAQ in 2021 and raised $12 billion, making it one of the largest IPOs in US history.
However, based on financial data, the company is facing pressure and has a significant gap with Tesla. The latest financial report data shows that in the first quarter of 2024, Rivian produced approximately 14000 new cars and delivered approximately 13600 vehicles. As a comparison, Tesla's production and delivery in the first quarter of this year were 433400 and 386800 vehicles, respectively.
According to financial report data, Rivian's revenue in the first quarter of this year was 1.2 billion US dollars, an increase of 8.15% compared to the same period last year; Operating loss of 1.484 billion US dollars; The net loss was 1.446 billion US dollars. According to public data, based on the closing price of $11.96 per share on June 25th Eastern Time, Rivian's stock price has fallen by about 49% since the beginning of this year.
But the news of receiving investment from Volkswagen undoubtedly injected a shot in the arm for Rivian. On June 25th Eastern Time, Rivian's stock price surged by over 50% in post market trading on the US stock market, fueled by the aforementioned news. As of the close of June 25th Eastern Time, Rivian (NASDAQ: RIVN) was trading at $11.96 per share, up 8.63%, with a latest market value of $11.904 billion.
Rivian stated, "We believe the opportunities for the future are enormous. Volkswagen's initial and planned investments, combined with our current cash, cash equivalents, and short-term investments, are expected to provide funding for operations, including new platforms, to achieve positive free cash flow and meaningful scale.".
And the other party in this cooperation, Volkswagen, has previously signed an EEA electronic and electrical architecture technology strategic cooperation framework agreement with Xiaopeng Motors. According to the agreement, Xiaopeng Motors will jointly develop the EEA electronic and electrical architecture for Volkswagen's electric vehicle platform in China. The jointly developed EEA electronic and electrical architecture is expected to be applied to Volkswagen brand electric vehicle models produced in China from 2026.
Some argue that Volkswagen is constantly seeking cooperation with car companies in the field of software architecture, or to alleviate the difficulties of its software department. Previously, according to the German magazine "Manager", as part of its strategic restructuring plan, Volkswagen Group will lay off 2000 employees in the CARIAD software department, which will further delay its long-awaited new software architecture.
It is reported that CARIAD is the software development department of Volkswagen, founded by former CEO Herbert Diess, formerly known as the Volkswagen Software Division established in 2020. However, the relatively slow development progress of CARIAD has had a serious impact on the launch of new cars by multiple brands under the Volkswagen Group, including Audi, Porsche, Volkswagen, and Bentley.
According to the financial report released by Volkswagen, CARIAD's revenue in 2022 was 796 million euros, with an operating loss of 2.068 billion euros during the same period, and a cumulative loss of nearly 3.4 billion euros in 2021 and 2022.
Subsequently, Volkswagen Group's Chairman of the Management Board, Obom, adjusted his strategy and further strengthened technical cooperation with technology companies, especially local Chinese enterprises. Subsequently, Volkswagen took a series of measures, including establishing a subsidiary of CARIAD China, establishing joint ventures with Chinese technology companies Horizon and Zhongke Chuangda, and investing in Xiaopeng Motors.
In March of this year, the management of Volkswagen Group reiterated at the 2024 media communication meeting that Volkswagen firmly believes that the future (transportation) will be electrified. According to the plan, Volkswagen's investment is expected to peak in 2024, with a high investment ratio of 13.5% to 14.5%.
In China, Volkswagen's goal is to continue to maintain its position as the top international car company and become one of the top three car manufacturers in the Chinese market by 2030. By 2030, Volkswagen will offer over 30 pure electric vehicles in the Chinese market.