To The Moon

🌟🌟🌟$Rivian Automotive, Inc.(RIVN)$  rose an impressive 49% in after hours trading today as Volkswagen announced that it is investing USD 1 billion in Rivian with plans to spend up to USD 5 billion as part of a software development partnership.

The deal which was disclosed on Tuesday would provide a lift for the balance sheet of Rivian and help lower the cost of Rivian's next generation of vehicles.  For Volkswagen, this deal would boost its software unit which has been struggling with quality issues.  So it is a Win Win situation for both companies. 

Volkswagen said it would invest USD 2 billion in the creation of a jointly owned software company that uses Rivian's technology as the foundation for programs that will go into both automakers' future vehicles in the 2nd half of the decade.

Volkswagen said that it also planned to purchase a USD 3 billion stake in Rivian over the next few years which includes the initial USD 1 billion injection. 

The much need cash injection would provide Rivian with a financial cushion as it works towards the launch of new vehicles which it said would be more affordable than its current offerings that start at USD 70,000.

Rivian's CEO RJ Scaringe said that Rivian now has enough money to fund its operations long enough to become a cash generating business.

Rivian reported a net loss of USD 5.4 billion last year.  Prior to the Volkswagen investment, Rivian had sought to conserve cash by postponing plans for a new factory in Georgia which it said would allow it to save around USD 2 billion on the launch of its next vehicle - the R2 SUV.

Guggenheim analyst Ronald Jewsikow is bullish on Rivian with a Buy rating and Target price of USD 18.

I believe that this deal for Rivian is a life saver at a time when it is struggling to survive.  It would also help Volkswagen which has been facing quality  issues with its troubled software unit, Cariad that delayed the launch of several models.

Rivian will launch its new R2 SUV avd R3 crossover in 2026 and 2027 with prices notably lower than Tesla Cybertruck. 

Rivian is also backed by $Amazon.com(AMZN)$  and said that it is expected to make around 57,000 vehicles this year, a tally that matched its prior forecast. 

Is Rivian a Buy now after its deal with Volkswagen?  I believe so but would prefer to watch it closely before making my decision as it is important to see how Rivian executes its plans.

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