Shares in Tesla rival electric car maker Rivian surged 28% on Wednesday after Volkswagen said it would invest up to $5 billion in the company to fuel its growth.
VW said it would initially invest $1 billion in the joint venture to develop a “next-generation software-defined vehicle platform” for both companies’ electric vehicles, with Rivian set to receive a total of another $4 billion by 2026.
The deal was seen as a much-needed boost for Rivian, which has been burning through cash and suffering heavy financial losses as it ramps up production despite slowing consumer demand for EVs. Rivian said the investment would enable it to mass-produce more affordable vehicles.
“We expect this partnership will not only bring our software and associated zone architecture to an even broader market through the Volkswagen Group’s global reach, but also help secure the capital needed for significant growth,” Rivian founder and CEO RJ Scaringe said in a statement.
The partnership could give a boost to VW’s oft-criticized vehicle software and help the company gain a bigger foothold in the U.S. VW plans to start integrating the software into its vehicles later this decade, the company said.
The deal, subject to regulatory approval, would make Volkswagen a major shareholder in Rivian.
Wedbush analyst Dan Ives called the deal a “game changer” for Rivian, gave the company an “outperform” rating, and raised his price target on Rivian to $20 per share from $15.
Rivian shares recently rose 28% to $15.34.
“Rivian will leverage this strong capital roadmap to support future growth and capitalize on this opportunity by achieving further cost savings while vertically integrating its software platform and electric architecture to deliver improved vehicles in the future,” Ives said in a note to clients.
Rivian ran into financial difficulties in March and canceled plans to build a new $5 billion manufacturing plant in Georgia.
The company said it lost $39,000 per car it produced last quarter. Bloomberg.
Rivian is also preparing to roll out a lineup of budget-friendly SUVs.
The R2 model, which can reach 60 mph in under three seconds, is expected to go on sale in the first half of 2026 for a price of $45,000.
Ford Motor Co. previously held a significant stake in Rivian but dropped plans to jointly develop vehicles and walked away from the deal in 2023. Amazon has also invested in the startup.
