A lifeline for Rivian? Volkswagen-Rivian launch joint venture

Shares of Rivian (RIVN) surged on Wednesday following Volkswagen's (VOW3.DE) announcement of a $5 billion investment in the electric vehicle manufacturer. The automakers' joint venture will primarily focus on creating new technologies for electric vehicles.

Yahoo Finance's Pras Subramanian breaks down the details of this deal, explaining where the money will go and how it might help the broader EV market.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith.

Video transcript

Let's turn now to the auto space shares of Rivian popping on the announcement of a $5 billion investment from Volkswagen Group.

Now, here's what this pertains.

The automakers are forming a joint venture that will focus on creating tech for electric vehicles.

The partnership comes amid a broader slowdown in ev sales and is seen as a lifeline for Rivian which has struggled with cash burn.

Rivian is down nearly 50% so far in 2024 here with more is Yahoo Finance is pro Superman and hey, pros, hey, what's going on?

Not much?

We're just trying to figure out what out with R in here.

Yeah, so, so basically you mentioned this deal.

This is a, this is a big joint venture uh situation here, right?

So um the money is gonna go towards uh building next generation software defined vehicles.

But basically what this means is ultimately what this means is Volkswagen is paying through AJ V for R and technology, their zonal hardware design which is sort of the underpins their R one vehicles and then also electrical architecture, all the all the different uh connectivity, motors, things like that they're paying for it all.

They're gonna pay that $1 billion initial investment convertible into stock at some point plus an additional $4 billion into the joint joint venture for a commitment of 5 billion.

Like you mentioned, it's a big deal for them because of the fact that cash burn was a problem.

There's concerns about how they're gonna bridge over to their R two nextgen vehicles coming in 2026.

Do they have the cash to get to that point?

They do?

And you have the backing of a major one of the largest automakers in the entire world.

Is this a win for V W-2?

And I guess also just in terms of if this partnership is successful, are there other EV makers that maybe could potentially stand to benefit from this too?

So the VW thing is very interesting because I was on the, on a call last night with analysts and VW, Ceo Oliver Bluma and the analysts were saying, hey, what's going on here?

You're already spending a lot of money on evs.

Why are you now buying more tech from another company?

Are you double dipping here?

What's gonna say?

No, no, no, we're not doing that.

We're using our other technology and other VW corporate brands, but we're using brine stuff for future vehicles.

People surmise they have a scout brand coming up.

Electric Adventure vehicles.

That could be where the RVI R two pops up in the VW world.

But you mentioned.

Uh other companies can benefit from these types of uh licensing situations.

I think there is a, a city note today talking about how lucid could be the next big sort of uh uh benefit year of this because they've already licensed technology to Aston Martin.

They build their own motors, the architecture, all that stuff, batteries and they have the know how to sort of, here's a package for you to build your EV.

And I think that, um, maybe there's some overall bullets in the entire space.

Even Fisker.

Look, they went out of business but they have valuable IP technology like that could go somewhere.

All right, pros, thanks so much, tracking all things.

Rivian plus Volkswagen and the entire automotive landscape.

Appreciate it.