Shares of Rivian (RIVN) are rising in the hours after the adventurous EV maker announced a joint venture deal with Volkswagen (VWAGY), which is key to injecting new capital into Rivian’s coffers.
The shares of the Irving, Ca. incumbent Rivian rose more than 40% in after-hours trading.
Volkswagen has announced that it plans to work with Rivian to create “next-generation software-defined vehicle architectures (SDV)” that could be used in both companies’ future EVs. The joint venture will leverage Rivian’s zonal hardware design and platform for the foundation of future vehicles, as well as Rivian’s expertise in electrical architecture for the vehicles. Rivian will license its existing IP rights to the joint venture.
In return, Volkswagen will invest an initial $1 billion in Rivian through an “unsecured convertible bond that will be converted into Rivian common stock,” with up to $4 billion in additional investments through 2026 for a total infusion of $5 billion.
“The partnership fits seamlessly with our existing software strategy, products and partnerships. We are strengthening our technology profile and competitive position,” said Oliver Blume, CEO of Volkswagen Group, in a statement.
“Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through the Volkswagen Group’s global reach, but this partnership is also expected to help secure our capital needs for substantial growth,” said Rivian CEO RJ Scaringe in the position.
This is exciting! Volkswagen Group CEO Oliver Blume and I are pleased to announce the formation of a joint venture between our two companies. This partnership brings Rivian’s software and zonal electronics platform to a broader market thanks to the global reach of the Volkswagen Group and… pic.twitter.com/11XVNUo89J
— RJ Scaringe (@RJSceringe) June 25, 2024
For Rivian, news of new capital eases concerns about the company’s runway while providing a bridge to the release of its next-generation vehicles, the R2 and R3 mass-market SUVs.
In terms of cash buffer, Rivian said it had $5.98 billion at the end of the first quarter, compared to $7.86 billion at the end of the fourth quarter. Volkswagen’s extra cash likely gives the company more runway as it prepares to produce these new vehicles.
In addition, Rivian CEO RJ Scaringe told Reuters yesterday that it was improving its cost structure and would simplify production at its Normal, IL factory, including through upgrades to its factory equipment.
This story is developing.
Pras Subramanian is a reporter for Yahoo Finance covering the auto industry. You can follow him Tweet and further Instagram.
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