Tesla CEO Elon Musk has raised concerns about Volkswagen’s recent investment in electric vehicle startup Rivian, questioning the German automaker’s financial strategy. This comes in the wake of Volkswagen’s commitment to invest up to $5 billion in Rivian, starting with an initial $1 billion injection.
The investment raised eyebrows, particularly given the history of other major backers of Rivian. Ford has completely divested its stake in the company, while Amazon has lost its exclusive rights with the EV maker. Volkswagen’s move to support Rivian comes at a time when the startup is still working towards profitability.
However, Volkswagen itself appears to be facing significant challenges. Recent reports suggest the company is considering closing factories in Germany for the first time in its history, facing increased pressure from Asian competitors in the European market. The automaker’s works council has promised “fierce resistance” to potential plant closures, which include both vehicle and component manufacturing facilities.
Adding to the concerns, Volkswagen has:
- Ended a 30-year-old job security program
- Initiated an $11 billion cost-cutting drive for its VW brand, aiming to save money by 2026
These moves have led many, including Musk, to question how Volkswagen plans to fund its Rivian investment while simultaneously cutting costs. Musk took to Twitter to express his skepticism:
Despite these concerns, there are potential upsides to Volkswagen’s investment. Rivian has shown growth in vehicle deliveries and production and is developing its more affordable R2 platform, which could boost sales and push the company closer to profitability.
Volkswagen’s financial position, while under pressure, remains substantial. The company reported:
- An operating profit of over $25 billion in the previous year, up 2.11% from 2022
- Revenue of $356.8 billion
These figures suggest that while Volkswagen is implementing cost-cutting measures, it still has significant financial resources at its disposal.
The situation highlights the complex dynamics of the rapidly evolving electric vehicle market, where established automakers are balancing their own transitions with strategic investments in promising startups. As the industry continues to shift, the success of Volkswagen’s investment in Rivian will likely be closely watched by investors and industry analysts alike.
