Rivien (RIVN) stocks soar for long hours after the electric vehicle maker announced a joint venture deal with Volkswagen (VWAG), crucially bringing new capital into Rivian’s coffers.
Shares of Irving, Calif.-based Rivian rose more than 40% in after-hours trading.
Volkswagen has announced plans to work with Rivian to create “next-generation software-defined vehicle (SDV) architectures” that will be used in both companies’ future electric vehicles. The joint venture will use Rivian’s “zonal hardware design” and platform for the foundation of future vehicles, as well as Rivian’s expertise in electrical architecture for vehicles. Rivian will license its existing intellectual property rights to the joint venture.
In exchange, Volkswagen will invest an initial $4 billion in Rivian through an “unsecured convertible security that will convert into Rivian common stock,” with up to $4 billion in additional investments phased through 2026 for a total injection of 5 billion dollars.
“This partnership fits perfectly with our existing software strategy, products and partnerships. We are strengthening our technological profile and our competitiveness,” Volkswagen Group CEO Oliver Blume said in a 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 is also expected to help secure our capital requirements for substantial growth,” said RJ Scaringe, CEO of Rivian, in the press release. statement.
That’s exciting! Oliver Blume, CEO of the Volkswagen Group, and I are delighted to announce the creation of a joint venture between our two companies. This partnership brings Rivian’s zonal software and electronics platform to a broader market thanks to the Volkswagen Group’s global reach and… pic.twitter.com/11XVNUo89J
– RJ Scaringe (@RJScaringe) June 25, 2024
For Rivian, news of the new capital infusion eases concerns about the company’s runway as it prepares for the release of its next-generation vehicles, the R2 and R3 mainstream SUVs.
As for its cash cushion, 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. Volkswagen’s additional cash presumably gives the company more breathing room as it prepares to produce these new vehicles.
Separately, Scaringe told Reuters yesterday that Rivian was improving its cost structure and simplifying production at its Normal, Illinois, factory through, among other things, upgrading its factory equipment.
This story is developing.
Pras Subramanian is a journalist for Yahoo Finance covering the automotive industry. You can follow it Twitter and on Instagram.
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