Rivian investment a ‘catch-up move’ for Volkswagen that could take years to pay off, GlobalData’s Mewawalla says

Volkswagen’s $5 billion investment in electrical vehicle startup Rivian is a “catch-up move” for the German auto maker, according to Cyrus Mewawalla, head of thematic intelligence at GlobalData.Volkswagen and Rivian on Tuesday announced that the German auto maker would invest as much as $5 billion in Rivian in the coming years.

Rivian electric vehicles sit in a lot at a Rivian facility in February 22, 2024 in Chicago, Illinois.in electrical vehicle startup Rivian is a "catch-up move" for the German automaker, but could take years to pay off, according to Cyrus Mewawalla, head of thematic intelligence at GlobalData. Volkswagen and Rivian on Tuesday announced that the German auto maker would invest as much as $5 billion in Rivian in the coming years following an initial $1 billion investment."Volkswagen has fallen behind in two areas, on electric vehicles themselves, but also on autonomous driving and other software within the car. And Rivian is strong on both," Mewawalla told CNBC's "Street Signs Europe" on Wednesday.

The investment will therefore help Volkswagen in these areas, but the firm is notably behind in the electric vehicle space, he added.Globaldata expects Volkswagen's share of battery powered EVs to be just 8% this year, compared to an estimate of 15% for BYD and up to 16% for, citing market conditions and shortages of parts. The auto maker added that it delivered 136,436 all-electric vehicles in the first three months of the year.

"I think it'll take a long time to pay off," Mewawalla said, referring to the investment. "Whilst this is a catch up move for VW I think it could take several years for it to make an impact on its, on its revenues."Mewawalla signaled that a potential risk is that Rivian is focused on premium cars, whereas many EV makers are focused on the mass market. This means cheap, but high-tech Chinese-made EVs are a threat, he said.

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