Rivian (NASDAQ: RIVN ) It is trying to use new technology to break into the highly competitive auto industry. In this context, it is as follows Teslawho (NASDAQ: TSLA ) the way However, Rivian isn’t doing as well as Tesla, and recently $1 billion in cash flow Volkswagen Highlights both similarities and differences in Rivian’s approach.
Building a capital-intensive manufacturing business from the ground up is difficult and expensive. Rivian has already spent billions on the effort and is likely to spend billions more. This makes access to capital very important. Rivian has a deal with Volkswagen that calls for the giant European automaker to invest $5.8 billion in the upstart’s business over time.
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The most recent installment was a $1 billion investment related to a major development milestone. Essentially, Volkswagen successfully tested the Rivion technology on its own vehicles. The cash infusion will help Rivian with its big near-term project: launching a more affordable version of its own truck.
In this, Rivian is following Tesla’s lead. First, Tesla launched high-end electric vehicles, and then, after reducing its production processes, it introduced a mass-market vehicle. An additional $1 billion will help Rivian continue on this path.
From Rivian’s perspective, the cash infusion from Volkswagen is crucial for its domestic vehicle development. However, unlike Tesla, Rivian has a broader view of its technology. As mentioned, Volkswagen’s cash was tied to that carmaker’s use of Rivian technology in Volkswagen vehicles. Rivian hopes to become both a vehicle manufacturer and an industry supplier.
So the cash Rivian is getting from Volkswagen is important, but equally important is the successful execution of Rivian’s supplier strategy. This two-pronged approach separates Rivian from Tesla and increases its chances of long-term success. In fact, when Tesla started building electric cars, there was basically no competition. Today, Rivian must compete with all the major auto companies and other EV start-ups. Becoming a supplier to the competition broadens the company’s sales opportunities and leverages its technology investment.
When you step back and look at the bigger picture, Volkswagen’s recent $1 billion investment is huge. This provides Rivian with the cash it needs to continue building its own EV business. And, equally important, it highlights the progress the company is making to become an industry supplier.
