German automotive powerhouse Volkswagen (VW) has announced plans to invest up to $5 billion in Rivian, a Tesla competitor.
This investment will lead to a joint venture that enables VW and Rivian, a U.S.-based electric vehicle manufacturer, to collaborate on technology.
Rivian’s stock soared by nearly 50% following the announcement.
This partnership arises as electric vehicle manufacturers face increasing competition and as Western nations begin imposing tariffs on Chinese imports.
Under the agreement, Volkswagen will make an initial investment of $1 billion in the electric truck and SUV manufacturer, with an additional $4 billion planned for investment by 2026.
Established in 2009, Rivian has yet to achieve a quarterly profit and reported a loss of $1.5 billion in the first quarter of 2024.
Facing competitive pressures from companies like Tesla and China’s BYD, VW is navigating a transition from traditional combustion engines to electric vehicles.
Other electric vehicle startups have found it challenging to succeed in a competitive market, exacerbated by rising interest rates affecting demand for expensive items.
The partnership grants Volkswagen immediate access to Rivian’s software, enhancing the German company’s vehicle offerings.
Competition is also heating up from Chinese electric vehicle producers who are expanding into global markets.
Earlier this month, the European Union (EU) indicated it might increase tariffs on Chinese electric vehicle imports by up to 38%.
EU and Chinese officials have held discussions ahead of a July 4th deadline.
A thorough investigation by the European Commission concluded that Chinese electric vehicle firms had received unfair subsidies.
In retaliation, China criticized the tariffs as a violation of international trade norms and labeled the investigation as protectionist.
This announcement follows the recent decision by the U.S. to raise tariffs on Chinese electric vehicles from 25% to 100%.
Similarly, Canada is considering raising its tariffs on Chinese electric vehicles to align with its allies.
