German automotive giant Volkswagen (VW) has announced a significant investment of up to $5 billion in Rivian, a US-based electric vehicle (EV) manufacturer and rival to Tesla.
The deal forms a joint venture, enabling VW and Rivian to share technology, a strategic move as competition among EV makers intensifies and Western nations impose tariffs on Chinese imports.
Rivian’s shares surged by nearly 50% following the announcement, signaling strong market confidence in the partnership.
VW plans to initially invest $1 billion in Rivian, with an additional $4 billion to be infused into the company by 2026.
This substantial investment aims to bolster Rivian, which, despite being founded in 2009, has yet to post a quarterly profit and reported a net loss exceeding $1.4 billion in the first quarter of 2024.
This collaboration will provide VW with immediate access to Rivian’s advanced software, which the German automaker can integrate into its vehicles. The move comes as VW faces increasing pressure from industry leaders like Tesla and China’s BYD to transition from fossil fuel-powered vehicles to electric alternatives.
Additionally, many EV startups have struggled in the competitive market, further strained by higher interest rates affecting demand for big-ticket purchases.
The announcement also comes against the backdrop of heightened competition from Chinese EV manufacturers expanding their global footprint.
In response, the European Union (EU) recently warned of imposing tariffs as high as 38% on Chinese EV imports, citing a months-long investigation by the European Commission that concluded Chinese EV companies had been “unfairly subsidised.”
China, in turn, criticised the proposed tariffs as a violation of international trade rules and labeled the investigation as “protectionism.”
This move by the EU follows the US’s decision to increase import levies on Chinese EVs from 25% to 100% and Canada’s consideration of similar measures to align with its allies.
In a separate development, Tesla announced a recall of over 11,000 of its Cybertrucks sold in the US due to issues with windscreen wipers and exterior trim.
The recalls affect vehicles that first went on sale at the end of November last year, marking another challenge for the prominent EV maker amid rising industry competition.
As VW and Rivian embark on this partnership, the EV market is set to witness intensified competition and strategic collaborations, shaping the future of the automotive industry in an era of rapid technological and regulatory changes.
Chioma Kalu
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