Rivian's $5.8 billion investment from VW is not a certainty. These are the milestones the EV manufacturer must achieve.

• The joint venture investment between VW and Rivian has been increased to $5.8 billion, as the companies have more ambitious goals for their operations than previously stated.
• The success of VW's capital investment in Rivian and the joint venture isn't guaranteed. Major automotive partnerships don't always lead to long-term success.
• Up to $3.5 billion in funding will be provided to Rivian by late 2027 or early 2028, based on agreed-upon milestones, in addition to the $2.3 billion received this year.

The planned investment for the joint venture between Detroit and electric vehicle startup has been increased to $5.8 billion, as the companies have broader aspirations than initially announced.

Early Wednesday trading saw shares of Rivian rise nearly 20% after investors were impressed with the details of the deal.

Rivian will receive funding and potential future revenue opportunities from VW through a joint venture that will provide the German automaker with cutting-edge electrical architecture and software for its EVs.

Rivian's production of its smaller R2 SUVs at its plant in Normal, Illinois, starting in 2026, as well as production of the midsize EV platform at a plant in Georgia, where Rivian paused construction earlier this year, will be supported by the capital.

Approximately 1,000 individuals are expected to be part of the joint venture, as stated by the companies.

The success of the deal between VW and Rivian is not guaranteed, and the capital provided by VW to Rivian is not certain. Rivian must first meet certain goals before the deal can be successful.

Numerous major mergers and joint ventures in the automotive industry have failed to achieve long-term success, with many falling apart before producing significant results.

In recent years, both VW and Rivian have experienced failures with their plans to develop electric vehicles (EVs) and autonomous vehicles, respectively.

Volkswagen is undergoing a restructuring that may affect its future plans, including reducing its workforce and cutting costs as sales and profits decline.

The joint venture between Rivian and VW Group Technology LLC is expected to be successful, with both companies having high hopes for its success.

Rivian will receive $2.3 billion this year and up to $3.5 billion by late 2027 or early 2028, based on negotiated milestones, with the investment coming from VW through various forms, including convertible notes, equity, and debt.

2024: $2.3 billion

In June, Rivian obtained $1 billion through a convertible note deal, which is anticipated to be converted into Rivian stock on December 1st.

$500 million of the $1 billion will be converted at a share price of $10.84, while the other $500 million will be converted based on the stock's 45-day volume-weighted average price (VWAP) before the conversion.

This week, Rivian will receive $1.3 billion in cash as a result of the deal and the formation of the joint venture, which includes payment for background intellectual property licenses and a 50% stake in the joint venture.

2025: $1 billion

Rivian will receive $1 billion in investment through equity at a 33% premium to the 30-day VWAP at the time of issuance if it achieves either two non-consecutive quarters of $50 million in gross profit or two consecutive quarters of gross profit. This will not happen before June, as per the companies.

Rivian has five years to achieve the milestone, which will be measured by its GAAP profit and exclude any impacts from the joint venture on its financials.

Claire McDonough, Rivian's CFO, stated that the company will provide an update on the financial effects of the joint venture when it releases its fourth-quarter results in the upcoming year.

2026: $2 billion, including loan

The joint venture's technology will be tested in winter conditions, and Rivian will receive $1 billion of equity based on the results. The equity investment amount will be determined by the 30-day VWAP leading up to the investment.

Rivian has the option to borrow $1 billion in October 2026, which will be secured by its equity stake in the joint venture.

The loan will not require principal repayment until 2029, but it will need to be prepaid over a 10-year period. The interest rate of the loan will be equal to VW's cost of debt on a seven-year maturity, plus 25 basis points.

2027/early 2028: $460 million

The joint venture will provide $460 million in equity to Rivian for the production of a saleable VW vehicle.

The equity investment will be priced at a 56% premium to a 30-day VWAP leading up to milestone.

During a press conference on Tuesday, Oliver Blume, CEO of VW Group, stated that the company anticipates utilizing Rivian's technologies across various price points, international markets, and brands.

Other details

Rivian will fund 25% of the shared platform costs within the joint venture with Volkswagen funding 75% through 2028.

From 2029, VW will contribute an additional $100 million annually towards the joint venture's expenses, thereby decreasing Rivian's financial burden.

Rivian expects to save money on materials by purchasing shared parts like electronic control units from suppliers.