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Rivian electrical automobiles are seen on show at a Rivian manufacturing unit in Chicago, Illinois on February 22, 2024.
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Volkswagen’s $5 billion funding in electrical car startup Rivian is “catching up” for the German automaker, nevertheless it may take years to repay, in response to Cyrus Mewawalla, head of thematic intelligence at GlobalData.
Volkswagen and Rivian introduced on Tuesday that the German automaker would make investments as a lot as $5 billion in Rivian over the approaching years, following an preliminary funding of $1 billion.
Shares of Rivian rose about 30% in early buying and selling on Wednesday. In the meantime, Volkswagen shares traded in Europe had been final down 2.3% at 2.43pm London time.
“Volkswagen has fallen behind in two areas, in electrical automobiles themselves, but additionally in autonomous driving and different in-car software program. And Rivian is powerful in each areas,” Mewawalla informed CNBC’s “Road Indicators Europe” on Wednesday “.
The funding will subsequently assist Volkswagen in these areas, however the firm is especially lagging behind in electrical automobiles, he added.
GlobalData expects Volkswagen’s share of battery-powered EVs to succeed in simply 8% this yr, in comparison with an estimate of 15% for BYD and as much as 16% for TeslaMewawalla mentioned.
Volkswagen mentioned deliveries of totally electrical automobiles fell 3.3% year-over-year in its first-quarter 2024 outcomes, citing market circumstances and components shortages. The automaker added that it delivered 136,436 totally electrical automobiles within the first three months of the yr.
“I believe it would take a very long time for the funding to repay,” Mewawalla mentioned, referring to the funding. “Though this can be a catch-up for VW, I believe it may take a number of years earlier than it has an affect on gross sales.”
Volkswagen declined to remark additional on the deal.
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Mewawalla famous {that a} potential danger is that Rivian focuses on premium automobiles, whereas many EV producers concentrate on the mass market. This implies low cost, however high-tech Chinese language-made electrical automobiles are a menace, he mentioned.
Each the EU and the US have expressed issues about low cost Chinese language electrical automobiles flooding the worldwide market and displacing Western corporations. The US has raised tariffs on imported Chinese language electrical automobiles, whereas the EU has introduced provisional duties. China and the EU are anticipated to start out talks on the problem.
Correction: An earlier model of this story misstated the timing of Volkswagen’s inventory transfer.
