Shares of Rivian (Nasdaq:RIVN) are exploding higher today, up nearly 9% during the day and up over 40% after hours on the news Volkswagen will invest $1 billion in Rivian, with plans to increase this amount to $5 billion.
Source: Debut of the Rivian R1T pickup at the 2018 Los Angeles Auto Show, November 27, 2018 by Richard Truesdell / BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/)
If the rally holds, shares will open above $16 tomorrow, June 26th. Rivian hasn’t traded at that level since February of 2024. The timing couldn’t be better for Rivian.
CEO RJ Scaringe shared the news on X (formerly Twitter):
This is exciting! Volkswagen Group CEO Oliver Blume and I are thrilled 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 through Volkswagen Group’s global reach and… pic.twitter.com/11XVNUo89J
— RJ Scaringe (@RJScaringe) June 25, 2024
The company has faced concerns about it’s funding and cash burn as it ramps R1T and R1S production, while preparing for the upcoming R2 and R3 launches. Currently, the company still loses money on each vehicle sold. While the company has also announced an R1T and R1S refresh, and major cost savings associated with ‘project peregrine’, it is still far too early to know whether it will be enough to make the company profitable or just close the gap.
Further, the EV industry has been in retreat in 2024 with waning demand and buyers preferring hybrid and ICE vehicles. While bankruptcy has been discussed for Rivian, as we noted just yesterday:
They’re certainly not a contender for bankruptcy here.
Rivian, many people have talked about a bankruptcy with Rivian, but they have a strong balance sheet with nearly $6 billion in cash.
This alliance between the two companies addresses shortcomings for both. Volkswagen will gain essential software expertise, while Rivian will benefit from Volkswagen’s extensive manufacturing knowledge and financial support. With Volkswagen recently pulling back on their own EV ambitions, it still gives them exposure and upside to the space, while likely also keeping the door open to platform sharing in the future.
This is not the first major investment into Rivian, with Amazon (Nasdaq: AMZN) and Ford (NYSE: F) both being early, major investors in the company.
Other EV companies like Lucid (Nasdaq: LCID), Polestar (Nasdaq:PSNY) and Faraday Future will almost certainly be shopping for suitors after seeing this investment, if they aren’t already. The latter is considered viable bankruptcy candidate this year without renewed funding, while Lucid so far has been able to count on the Saudi Arabia’s Public Investment Fund for additional investments.
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