Volkswagen promised to spend $1 billion in the struggling electric vehicle firm immediately and up to $5 billion in total as part of a software development pact, which sent shares of Rivian soaring 40% before markets opened on Wednesday.
Following its 2021 IPO, Rivian’s market valuation surged to around $86 billion; yet, the company is bleeding money and in desperate need of funding to create its next vehicle.
Volkwagegen needs assistance in the software market, where Rivian is seen as a major player.
Volkswagen will invest up to an extra $4 billion in Rivian Automotive Inc. after initially investing $1 billion.
Laptops 1000A further investment of up to $2 billion in Rivian’s common stock is included in that $4 billion, with two installments of $1 billion each anticipated in 2025 and 2026.
It is anticipated that a $2 billion joint venture investment will be made up of a payment upon the venture’s founding and a loan that will become available in 2026.
Rivian founder and CEO RJ Scaringe stated in a prepared statement,
“Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth.”
Both businesses anticipate cutting costs per vehicle produced as they increase scale.
The electrical architecture and software platform of Rivian will be made available to Volkswagen Group through a license that Rivian intends to provide to the joint venture.
Oliver Blume, CEO of Volkswagen Group, stated,
“Our customers benefit from the targeted partnership with Rivian to create leading technology architecture.”
“By working together, we can provide our vehicles with the best solutions more quickly and at a lower cost.”
The joint venture’s technology originally revealed late Tuesday, is anticipated to be used in cars introduced in the second part of this decade.
The Irvine, California-based Rivian made waves when it went public on the stock market in 2021.
Laptops 1000Its market worth was close to $86 billion higher than Ford’s and slightly less than General Motors’. The company’s shares shot up 53% during this period.
In the electric vehicle space, investors were looking for the next big thing, and Rivian already had some well-known supporters.
Ford gave Rivian a half-billion dollar investment and a deal with Amazon.com to build 100,000 electric delivery vehicles.
However, Rivian has not produced a profit in the past few years, and its stock has dropped from its astronomical highs.
Rivian put a $5 billion electric truck facility in Georgia on hold to save money. In March, Rivian stated that there was no schedule for when to work on the plant.
Dan Ives of Wedbush described the joint venture with Volkswagen as a “game changer” for Rivian, suggesting that it might be just the boost the company needs.
“Rivian plans to take advantage of this favorable circumstance by implementing this comprehensive capital plan to facilitate future expansion, vertically integrate its software system and electrical framework, attain additional cost reductions, and eventually produce better automobiles,” Ives stated in a research note on Wednesday.
