Shares of Rivian Automotive (NASDAQ: RIVN) were still going on Wednesday afternoon, after the company announced it was closing the deal Volkswagen that could cost more than $5 billion electric vehicle (EV) the maker.
As of 1:30 pm ET, Rivian’s shares were up about 18.3% from Tuesday’s closing price.
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Under the agreement, which was first revealed in June, Rivian and Volkswagen have formed a joint venture to develop and market Rivian’s so-called “zonal” EV Architecture. The platform, which will be used in Rivian’s upcoming R2 SUV, could provide a more flexible technology base for EVs of different sizes and price points. Among car manufacturers outside of China, only Tesla has something in common.
The joint venture will develop the design into something that can support a series of new EVs from Volkswagen group companies. The deal provides for a series of payments from Volkswagen to Rivian as milestones are met, as well as a $1 billion loan option that brings the potential value of the deal to about $5.8 billion by early 2028.
Volkswagen will receive Rivian shares in return for most of these payments. But for Rivian shareholders, any concerns about inventory cuts should be more than offset by the security VW’s revenue will provide the California EV maker.
Here’s the key takeaway for Rivian investors: This deal makes it easier for Rivian to have the money to reach sustainable scale, regardless of what happens in the US political arena.
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