Rivian (RIVN) shares are rising in long hours after the EV maker announced a joint venture deal with Volkswagen (VWAGY), crucially bringing new capital into Rivian’s coffers.
Shares of Irving, Calif.-based Rivian rose more than 40% in after-hours trading.
Volkswagen announced that it intends to work with Rivian to create “next-generation software-defined vehicle (SDV) architectures” to be used in both companies’ future EVs. The joint venture will use Rivian’s “zonal hardware design” and platform to underpin future vehicles, as well as Rivian’s electrical architecture expertise for the vehicles. Rivian will license its existing intellectual property rights to the joint venture.
In return, Volkswagen will invest an initial $1 billion in Rivian through an “unsecured convertible note that will convert into shares of Rivian common stock,” with up to $4 billion in additional investments made through 2026 for an infusion total of US$5 billion.
“The partnership fits perfectly with our existing software strategy, products and partnerships. We are strengthening our technological profile and our competitiveness”, said Oliver Blume, CEO of the 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 global reach of the Volkswagen Group, but this partnership is also expected to help secure our capital needs for substantial growth,” he said. Rivian CEO RJ Scaringe said in the statement.
This is exciting! Volkswagen Group CEO Oliver Blume and I are excited to announce the formation of a joint venture between our two companies. This partnership brings Rivian’s zonal software and electronics platform to a broader market through the global reach of the Volkswagen Group and… pic.twitter.com/11XVNUo89J
-RJ Scaringe (@RJScaringe) June 25, 2024
For Rivian, the news of new capital dispels concerns about the company’s direction as it approaches the launch of its next-generation vehicles, the R2 and R3 mass-market SUVs.
In terms of cash reserves, Rivian said it had $5.98 billion at the end of the first quarter, up from $7.86 billion at the end of the fourth quarter. The additional money from Volkswagen will likely give the company more room as it prepares to produce these new vehicles.
Separately, Scaringe told Reuters yesterday that Rivian was improving its cost structure and streamlining production at its Normal, Illinois, factory through, among other things, upgrades to its factory equipment.
This story is developing.
Pras Subramanian is a Yahoo Finance reporter covering the auto industry. You can follow it Twitter and so on Instagram.
Click here for the latest stock market news and in-depth analysis, including events moving stocks
Read the latest financial and business news from Yahoo Finance
