Following the announcement of a notable joint venture (JV) agreement, shares of Rivian Automotive, Inc. (NASDAQ: RIVN) experienced a remarkable rally on the US stock charts. During the after-market session on Tuesday, RIVN stock soared by 49.92% to $17.93, continuing its momentum from the regular session where it rose by 8.63% to close at $11.96.
Formation Of The Joint Venture
Rivian Automotive (RIVN) and Volkswagen Group have declared their intention to establish an equally controlled and owned JV focused on developing next-generation electrical architecture and cutting-edge software technology.
This strategic partnership aims to expedite the development of software for both Rivian and Volkswagen, allowing the companies to leverage their complementary strengths, reduce costs per vehicle by scaling operations, and accelerate innovation on a global scale.
Rivian’s established in-market zonal hardware design and integrated technology platform will serve as the basis for future Software-Defined Vehicle (SDV) development within the JV, benefiting both companies’ vehicles.
Rivian will contribute its expertise in electrical architecture and is expected to license its existing intellectual property rights to the joint venture. Over the past few months, Rivian has made efforts making sure that its electrical design and software work with the cars in the Volkswagen Group.
Short-Term And Long-Term Objectives
In the short term, the JV is anticipated to enable Volkswagen Group to utilize Rivian’s existing electrical architecture and software platform, thereby accelerating Volkswagen Group’s SDV plans and transitioning to a fully zonal architecture.
Both companies will continue to independently operate their respective vehicle businesses. The partnership is projected to launch vehicles incorporating the new technology in the latter half of the decade.
Investment And Future Prospects
Aligned with the vision of this strategic partnership, Volkswagen Group plans to make a substantial $5 billion investment into Rivian. Initially, Volkswagen Group will invest $1 billion through an unsecured convertible note, which will convert into Rivian’s common stock upon certain conditions being met, including regulatory approvals by December 1, 2024. An additional $4 billion investment is expected to follow as part of the transaction.
