Electric car maker Rivian’s shares soared 28% Wednesday after Volkswagen revealed it would invest up to $5 billion to jumpstart the Tesla rival’s growth.
VW said it would initially invest $1 billion into a joint venture to create what was described as a “next generation software-defined vehicle platform” that will be used in both firms’ electric cars. Rivian is slated to receive another $4 billion in total by 2026.
The deal was seen as a much-needed boost for Rivian, which has burned through cash and taken heavy financial losses while ramping up production despite slowing consumer demand for EVs. Rivian said the investment would help the firm churn out more affordable vehicles.
“Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth,” Rivian founder and CEO RJ Scaringe said in a statement.
The tie-up will provide a boost to VW’s oft-criticized vehicle software and could help the automaker gain a bigger foothold in the US. VW will begin integrating the software into its own vehicles in the second half of the decade, the company said.
The deal also would establish Volkswagen as a major Rivian shareholder if it secures regulatory approval.
Wedbush analyst Dan Ives described the tie-up as a “game changer” for Rivian while setting an “outperform” rating for the company’s stock. He also raised his price target for Rivian to $20 per share, up from $15.
Rivian shares were recently up 28% at $15.34.
“Rivian will leverage this opportunity by utilizing this robust capital roadmap to support future growth while vertically integrating its software platform and electrical architecture while achieving further cost savings and deliver improved vehicles down the line,” Ives said in a note to clients.
In March, Rivian halted plans to build a new $5 billion production plant in Georgia as it contended with financial woes.
The car maker lost a whopping $39,000 for every car it produced last quarter, according to Bloomberg.
Rivian is also preparing to roll out a line of budget-friendly SUVs.
The R2 model, which can hit 60 miles per hour in less than three seconds, is set to debut in the first half of 2026 and cost $45,000.
Ford Motor Company previously held a sizable stake in Rivian, but exited the arrangement in 2023 after nixing plans to jointly develop vehicles. Amazon also invested in the startup.
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