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• Volkswagen’s $5 billion investment in Rivian Automotive Inc. (NASDAQ: RIVN) will help them to close the gap with EV market leader Tesla.

Rivian Automotive Inc. (NASDAQ: RIVN), one of the small electric vehicle (EV) companies that looked like it could not survive, got a $5 billion investment from Volkswagen, which means it will almost certainly survive. The question is, what is in the deal for VW?

Volkswagen will use its advanced technology for future generations of vehicles. “Rivian and Volkswagen Group intend to enter a joint venture to create next generation software-defined vehicle (SDV) platforms to be used in both companies’ future electric vehicles,” the companies said. The investment will come in two stages. The first is $1 billion. The second, which is uncertain, could total as much as $4 billion.

The deal has two important aspects. The first is to keep Rivian alive. Its stock is down over 50% year to date, but the announcement drove it higher. Rivian lost $1.4 billion in the most recent quarter, and those losses will continue.

Next, VW is like the balance of the other car companies chasing Tesla. It is behind the market leader, particularly in software development. VW, the second largest car company in the world after Toyota, has a chance to close that gap with Rivian technology. VW owns several brands, including Audi, Bentley, and Porsche. It can use the Rivian technology, built between the two companies, to give it a foundation to fight Tesla and most of the world’s largest car manufacturers, which are putting billions of dollars into EV development.

With the investment, VW can realize its EV ambitions more quickly.

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