Shares of Rivian (RIVN) rose as much as 16% in early afternoon trading on Wednesday after the EV maker announced an expansion of its partnership with Volkswagen (VWAGY), with the German automaker pouring more money into a joint venture.
The joint venture (JV), initially announced in June, will use Rivian’s electrical architecture – known as ‘zonal architecture’ – and its associated software stack to enable the launch of Rivian’s upcoming mid-size R2 SUV in the first half of 2026 to make.
In a new development, Rivian technology will also support the expected launch of new Volkswagen EVs ‘as early as 2027’.
The joint venture will launch today, initially in North America and eventually expand to Europe, and will also support the development of electric vehicles in the subcompact segment. Volkswagen will increase its total investment in the deal from $5.8 billion to $5.8 billion.
VW has already invested $1 billion in the form of a convertible bond in the joint venture and will inject approximately $1.3 billion for background IP licensing and a 50% equity stake in the joint venture.
The remaining $3.5 billion is expected to come “in the form of equity, convertible notes and debt at future dates,” assuming the milestones are met.
Notably, the deal does not include collaboration on battery technology, platforms or electric drive units, a Rivian spokesperson confirmed to Yahoo Finance.
“This partnership will provide capital needed for the GA plant’s R2 platform and mid-size R2/R3 platform, which we view as a big step in the right direction and an important step for Rivian going forward,” Wedbush analyst Dan Ives wrote in a note Wednesday morning. .
“While [the VW deal] is an exciting announcement for us to see and ultimately launch. In the Street’s eyes, the main focus will still be on the R1 execution plans, production, optimization, the Georgia factory and the profitability story for Rivian in the coming quarter. 12 months,” Ives added.
Last week, Rivian revealed in its third-quarter financial results that it expects a larger-than-expected full-year loss due to a parts issue in its supply chain, but the company still expects a “modest gross profit” in the fourth quarter .
Wedbush maintained its Outperform rating and $20 price target after announcing the expanded deal.
Volkswagen’s need for Rivian’s software expertise comes as no surprise, as the company’s CARIAD software unit has been plagued by development delays and software bugs, which impact the launch of VW Group vehicles such as the Porsche Macan EV and other Audi vehicles.
For Rivian, the capital injection provides a runway for production of the upcoming R2 vehicles.
