Volkswagen, the German automaker, said on Tuesday that it would invest up to $5 billion in Rivian, a maker of electric trucks that has struggled to turn a profit, and that the companies would cooperate on software for electric vehicles.
The deal creates an unusual alliance between the world’s second-largest carmaker and an electric vehicle start-up that has strained to live up to investors’ expectations that it would achieve the kind of success that made Tesla the world’s most valuable automaker.
If successful, the partnership would address weaknesses at both companies. It would provide Volkswagen with the software expertise that auto analysts say it sorely lacks. And Rivian, in addition to cash, would benefit from the manufacturing expertise of an automaker that produces nearly 10 million vehicles a year, putting it just behind Toyota Motor in the global auto industry.
Volkswagen said it would initially invest $1 billion in Rivian, and over time increase that to as much as $5 billion. If regulators approve the transaction, Volkswagen could become a significant shareholder. The infusion represents a big vote of confidence in Rivian, which loses tens of thousands of dollars on each vehicle it sells.
Rivian’s pickups and sport utility vehicles have received glowing reviews in the automotive press, but the company has struggled to ramp up manufacturing at its factory in Normal, Ill. In recent months, many investors have grown worried that the company may not survive long enough to become profitable.
R.J. Scaringe, Rivian’s founder and chief executive, said the cash from Volkswagen would help Rivian launch a midsize S.U.V. called the R2 that will sell for about $45,000, and to complete a factory in Georgia. Rivian halted construction of the Georgia plant in March in an effort to save more than $2 billion.
“This is important for us financially,” Mr. Scaringe said of the Volkswagen partnership on a conference call with reporters on Tuesday.
The cheapest vehicle Rivian currently sells, the R1T pickup, starts around $70,000, a price that has limited its sales to affluent early adopters. Its R1S S.U.V. starts at $75,000. Even at those prices, Rivian lost $39,000 for every vehicle it sold in the first three months of the year.
Rivian’s stock jumped more than 50 percent in extended trading on Tuesday after the deal was announced.
The electric vehicle market has been divided between relatively young companies like Tesla and Rivian, which make only battery-powered cars, and established carmakers like Volkswagen, General Motors and Toyota, which have often struggled to master the new technology.
Except for Tesla, none of newer U.S. carmakers specializing in electric vehicles have won significant market share. Some, like Fisker and Lordstown Motors, have ceased production and filed for bankruptcy protection.
Auto analysts have long considered Rivian among the electric vehicle start-ups most likely to survive, in part because it has raised billions of dollars in investment. Amazon is one of its largest shareholders and the main customer for the company’s delivery vans.
But Volkswagen and Rivian operate very differently, and it could be a challenge for them to work together. Volkswagen, which is based in Wolfsburg, Germany, is known for rigid, top-down management and is owned in part by the state of Lower Saxony. Rivian, based in Irvine, Calif., has the more freewheeling culture of a technology start-up. Rivian said in April that it expected to sell 57,000 vehicles this year, far fewer than Volkswagen sells in a week.
Mr. Scaringe and Oliver Blume, the chief executive of Volkswagen, said the deal blossomed after the two met at a Porsche customer center and bonded over their love of cars.
“We have a very similar mind-set,” Mr. Blume said during the conference call.
Ford Motor was for a time a big shareholder in Rivian, and the two companies once said they would build S.U.V.s together. But that plan never came to fruition, and Ford sold most of its Rivian shares. Ford and Volkswagen have a separate partnership that includes joint development and production of electric vehicles.
The Volkswagen-Rivian alliance could encourage other established carmakers to consider investments or partnerships connecting them with start-ups like Lucid Motors — companies that have well-regarded technology but are unprofitable and struggling to establish themselves in a crowded market. Another large automaker, Stellantis, the parent company of Chrysler, Fiat and Peugeot, has invested in a Chinese company, Leapmotor, for access to its electric car technology.
Vehicles using the software developed by the new joint venture will go on sale during the second half of the decade, Volkswagen said. Any of Volkswagen’s brands, which include Audi and Porsche, could use the technology, Mr. Blume said. Scout, the American off-road brand that Volkswagen is reviving at a factory under construction in South Carolina, could also use the software.
But Volkswagen and Rivian will continue to market their vehicles separately.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
