Rivian financial investment a ‘catch-up move’ for Volkswagen that could acquire decades to shell out off, GlobalData’s Mewawalla suggests

Volkswagen’s $5 billion financial commitment in electrical auto startup Rivian is a “capture-up shift” for the German automaker, but could take several years to pay back off, in accordance to Cyrus Mewawalla, head of thematic intelligence at GlobalData.

Volkswagen and Rivian on Tuesday declared that the German automobile maker would spend as substantially as $5 billion in Rivian in the coming several years next an preliminary $1 billion financial investment.

Rivian shares were up 42% in premarket investing on Wednesday. Meanwhile, Europe-traded shares in Volkswagen were being very last down 2.6% as of 12:47 a.m. London time.  

“Volkswagen has fallen powering in two parts, on electric powered autos on their own, but also on autonomous driving and other software package within just the vehicle. And Rivian is solid on both,” Mewawalla advised CNBC’s “Avenue Symptoms Europe” on Wednesday.

The investment decision will therefore assistance Volkswagen in these locations, but the agency is notably behind in the electric powered motor vehicle room, he extra.

Globaldata expects Volkswagen’s share of battery run EVs to be just 8% this year, in contrast to an estimate of 15% for BYD and up to 16% for Tesla, Mewawalla described.

Volkswagen claimed deliveries of all-electric cars have been down by 3.3% calendar year-on-12 months in its 2024 1st quarter final results, citing market place situations and shortages of elements. The automobile maker included that it shipped 136,436 all-electric powered autos in the very first three months of the year.

“I believe it’s going to acquire a prolonged time to pay off,” Mewawalla claimed, referring to the financial investment. “While this is a catch up transfer for VW I consider it could take quite a few decades for it to make an impression on its, on its revenues.”

Volkswagen did not promptly respond to CNBC’s ask for for remark.

Mewawalla signaled that a prospective chance is that Rivian is concentrated on premium cars, whereas lots of EV makers are focused on the mass marketplace. This signifies cheap, but large-tech Chinese-built EVs are a risk, he mentioned.

Both equally the EU and U.S. have expressed worries about low-cost Chinese EVs flooding the world industry and crowding out Western providers. The U.S. has raised tariffs on imported Chines EVs, while the EU has announced provisional obligations on them. China and the EU are expected to start out talks on the difficulty.