Rivian Stock Surges 36% on Volkswagen Investment
On June 26, 2024, shares of electric vehicle startup Rivian skyrocketed 36% after the company announced a major investment from German automaker Volkswagen. The deal, valued at $8 billion, will see VW take a 25% stake in Rivian and collaborate on developing new electric models.
The news comes as a much-needed boost for Rivian, which has struggled with production delays and supply chain issues over the past year. The company’s stock price had plummeted nearly 70% from its all-time high in 2023 amid concerns about its ability to ramp up manufacturing and compete with established players like Tesla and Ford.
Under the terms of the agreement, VW will invest $8 billion in Rivian in exchange for newly issued common stock. The two companies will also work together on developing a new electric vehicle platform that can be used across multiple models and segments.
This will allow Rivian to leverage VW’s economies of scale and engineering expertise while giving the German automaker access to Rivian’s skateboard architecture and software capabilities.
“This partnership is a game-changer for Rivian,” said CEO RJ Scaringe. “Volkswagen’s investment and our collaboration on next-generation EV technology will accelerate our mission to create sustainable transportation solutions and deliver long-term value for our shareholders.”
The deal also includes provisions for VW to increase its stake in Rivian to up to 49% over time, subject to certain conditions. This suggests that the German company sees significant potential in Rivian’s technology and believes it can help the startup overcome its current challenges.
Analysts have largely welcomed the news, with many upgrading their ratings and price targets on Rivian stock. Morgan Stanley’s Adam Jonas, for example, raised his price target from $30 to $50, citing the potential synergies between the two companies.
“This partnership validates Rivian’s technology and provides a much-needed capital injection to fund its growth plans,” Jonas wrote in a note to clients. “It also gives VW a foothold in the fast-growing electric truck and SUV market.”
However, some investors remain cautious about Rivian’s long-term prospects, given the intense competition in the EV space and the company’s limited track record. The startup has yet to turn a profit and has faced production challenges that have hampered its ability to meet demand for its R1T pickup and R1S SUV models.
Nonetheless, the Volkswagen investment represents a significant vote of confidence in Rivian’s technology and potential. If the two companies can successfully collaborate on developing new electric models and overcoming manufacturing hurdles, it could pave the way for Rivian to become a major player in the global EV market.
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