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Shares of electric vehicle maker Rivian (RIVN) are rising for an extended period of time after the company announced a joint venture agreement with Volkswagen (VWAGY), bringing new capital into Rivian’s coffers.
Shares of Irvine, California-based Rivian rose more than 40% in after-hours trading.
Volkswagen has announced its intention to work with Rivian to create a “next-generation software-defined vehicle (SDV) architecture” that will be used in future vehicles from both companies. The joint venture will leverage Rivian’s regional hardware designs and platforms as the basis for future vehicles, as well as Rivian’s vehicle electrical architecture expertise. Rivian will license its existing BroadCast Unitedlectual property to the joint venture.
In exchange, Volkswagen will initially invest $1 billion in Rivian through “unsecured convertible notes that will convert into Rivian common stock” and will invest an additional $4 billion in phases by 2026, for a total injection of $5 billion.
“This collaboration fits perfectly with our existing software strategy, products and partnerships. We are strengthening our technological prowess and our competitiveness,” Volkswagen Group CEO Oliver Blume said in a statement.
“This partnership will not only bring our regional electronics and software platforms to a broader market through the Volkswagen Group’s global reach, but will also help secure our substantial growth capital needs,” Rivian CEO said in the statement.
This is so exciting! Oliver Blume, CEO of Volkswagen Group, and I are pleased to announce a joint venture between our two companies. This collaboration will bring Rivian’s regional electronics and software platforms to a wider market through the global reach of Volkswagen Group… pic.twitter.com/11XVNUo89J
— RJ Scaringe (@RJScaringe) June 25, 2024
For Rivian, the news of new capital eases concerns about the company’s longevity as it works to launch its next-generation vehicles, the R2 and R3 mass-market SUVs.
As for its cash cushion, Rivian said it had $5.98 billion in cash reserves at the end of the first quarter and $7.86 billion at the end of the fourth quarter. The extra cash from Volkswagen could give the company more oomph as it prepares to produce these new vehicles.
CASH INJECTION: A Rivian R3 SUV is shown during Rivian’s South Coast Theater event in March, where it unveiled its all-electric R2 midsize SUV. (Phillip Faraone/Getty Images for Rivian) (Phillip Faraone via Getty Images)
Separately, Scaringe told Reuters yesterday that Rivian is improving its cost structure and streamlining production at its Normal, Illinois, plant by upgrading factory equipment, among other measures.
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This story is developing.
Pras Subramanian is a reporter covering the automotive industry for Yahoo Finance. You can follow him on Twitter and Instagram.
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