FYI: Elon Musk questions Volkswagen’s significant investment in Rivian amidst the German auto giant’s cost-cutting measures and financial uncertainties.
Tesla’s Elon Musk Questions Volkswagen’s Rivian Investment
Tesla CEO Elon Musk has raised eyebrows over Volkswagen’s substantial financial commitment to electric vehicle startup Rivian. Earlier this year, the German automotive giant declared it would embark on an initial $1 billion investment in Rivian, with the potential for this amount to balloon up to $5 billion as the startup progresses towards profitability.
Volkswagen’s Intentions and Financial Concerns
Volkswagen’s intended infusion comes on the heels of investments from Ford and Amazon, who either divested their stakes or lost exclusivity in deals with Rivian. This strategic move by Volkswagen aims to bolster Rivian’s foray into the EV market. However, questions about Volkswagen’s financial stability loom large.
Reports surfaced recently suggesting Volkswagen is contemplating shuttering plants in Germany due to mounting pressure from Asian automakers within Europe. This move would mark the company’s first factory closures in its home country, which has led the company’s works council to pledge "fierce resistance" against these potential shutdowns. The possibility of making obsolete both vehicle and component manufacturing plants is especially concerning.
Cost-Cutting Measures and Future Investments
In another effort to streamline operations, Volkswagen has terminated a job security program that has been in place for three decades. Additionally, its flagship VW brand is undergoing an $11 billion cost-cutting initiative aimed at saving money by 2026, according to Reuters.
Given such extensive cost-cutting measures, the feasibility of Volkswagen’s significant investment in Rivian has come under scrutiny. Elon Musk, for one, openly questioned the source of Volkswagen’s funding for this ambitious endeavor, tweeting, "Where will they get the money?"
Rivian’s Path to Profitability
From a strategic standpoint, Rivian appears to be on the right path, with an increase in vehicle deliveries and production. The startup is also working on its next vehicle platform, the R2, which promises to be more affordable and thus expected to drive up sales. These developments could potentially validate Volkswagen’s investment.
Volkswagen’s Performance Metrics
Despite concerns, Volkswagen reported an operating profit of just over $25 billion last year, marking a 2.11 percent increase from 2022. Its revenue hit $356.8 billion, reflecting the company’s overall robust financial health—at least on paper.
Conclusion
Elon Musk’s skepticism about Volkswagen’s Rivian investment highlights the complexities and uncertainties surrounding such a high-stakes commitment. While Volkswagen appears to have the financial foundation to support its plans, the juxtaposition of investing in new ventures while simultaneously undergoing deep cost-cutting measures poses legitimate questions about its future strategy.
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Authored by:
William Kouch, Editor of Automotive.fyi
