MW Rivian's stock soars as joint venture with Volkswagen is upsized to $5.8 billion
By Claudia Assis
Joint venture promises 'cutting-edge' software and scale for electric vehicles
Rivian Automotive Inc. and Volkswagen have launched their upsized joint venture, joining forces with the goal of creating "cutting-edge" electric-vehicle technology.
Rivian $(RIVN)$ and the Volkswagen (XE:VOW) said that the deal totals $5.8 billion, which is larger than when the two companies announced it in June. The joint venture started operations on Wednesday.
Shares of Rivian rose 20% on Wednesday, on track for their highest close since Sept. 19, when they closed at $13.15, and their largest one-day percentage increase since June 26, when they rose 23.24%.
Stephen Gengaro at Stifel said the joint venture's funding structure bolsters Rivian's capital outlook, enhances the EV maker's production expansion goals - including its planned manufacturing facility in Georgia - and reinforces the company's long-term growth trajectory.
"We believe this deal reflects strong confidence from Volkswagen in Rivian's excellent technology stack and long-term potential," Gengaro said.
Some investors had grown skeptical that Volkswagen would remain committed to the venture given "recent tumult" at the German car maker, Piper Sandler analyst Alex Potter said.
Volkswagen last month reported a 64% drop in its quarterly profit, which it pinned on cost increases. The car maker, which owns brands such as Audi, Skoda and Bentley, has seen its profits slump in recent months due to higher energy costs and a slowdown in sales in China, its largest market.
"Suffice it to say, this [joint venture] is key to Rivian's future, and we think the deal's closure addresses a major overhang," Potter said.
Cantor Fitzgerald's Andres Sheppard said it was encouraging to see the upsizing of about $800 million, adding, "We continue to expect that as a result of the [joint venture] closing, Rivian will be able to materially extend its cash runway, achieve additional cost savings, and improve its margin profile over the medium to long term."
The two companies said that the venture "combines the strength of both partners to create cutting-edge software and electronics architectures and scale the electric-vehicle platforms and architectures."
"The goal is to be able to offer customers the best technological solution as early as possible," they said in their joint statement.
Rivian reported mixed third-quarter earnings last week but, crucially, held on to its sales and production outlook.
The joint venture will be co-led by Wassym Bensaid, Rivian's chief software officer, and Carsten Helbing, Volkswagen's chief technical engineer.
"We're thrilled to see our technology being integrated in vehicles outside Rivian - this is an important enabler to help accelerate EV adoption," Rivian Chief Executive RJ Scaringe said in a statement late Tuesday.
"The partnership with Rivian is the next logical step in strengthening our global competitive and technological position," VW CEO Oliver Blume said.
The companies first announced the joint venture, then expected at up to $4 billion, and a $1 billion investment from Volkswagen in June.
Volkswagen plans to invest up to $5.8 billion in Rivian and the joint venture by 2027. The initial $1 billion investment, the form of convertible notes, has already been made.
The venture's goal is to use Rivian's existing EV architecture and software technology stack to launch Rivian's next-generation EV in the first half of 2026 and to support an expected launch of the first models from Volkswagen as early as 2027, the companies said.
In just 12 weeks, the joint team developed an drivable demo EV, highlighting the integration capabilities of both companies, they said.
-Claudia Assis
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(END) Dow Jones Newswires
November 13, 2024 12:42 ET (17:42 GMT)
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