Shares of Rivian Automotive(NASDAQ: RIVN) catapulted this morning, surging 23.8% within minutes of the start of trading. The electric vehicle (EV) stock was trading 19% higher as of 10:45 a.m. ET Wednesday.
Amid all of its struggles in recent years, the biggest hope for Rivian has been its collaboration with Volkswagen Group, which has backed the EV maker's technology and is an investor. Yesterday, the two companies struck their biggest deal yet, forming a multibillion-dollar joint venture (JV) that could turn Rivian's fortunes around.
Rivian's massive deal with Volkswagen
In June, Rivian announced plans for a JV worth up to $5 billion with Volkswagen and said it expected to form the JV by the fourth quarter of 2024. Rivian just confirmed the much-awaited deal.
Rivian and Volkswagen have formed a JV for a deal size of up to $5.8 billion to be jointly led by Rivian's chief software officer, Wassym Bensaid, and Volkswagen's chief technology engineer, Carsten Helbing.
Under the venture, Volkswagen has already invested $1 billion in the form of convertible notes, will invest another $1.3 billion for background IP licenses and a 50% equity stake in the venture, and another up to $3.5 billion in equity, debt, and convertible notes in the future based on certain milestones.
The JV will focus on the development of Rivian's next products, the R2 and R3, with the R2 expected to be launched in the first half of 2026. The biggest highlight of the venture, though, is the potential launch of Volkswagen's first models under it by early 2027. Volkswagen's models built on Rivian's technology will push the EV maker into the mainstream automotive industry and could open up big opportunities in the coming years.
What's next for Rivian stock?
Lingering production issues have hit Rivian lately, and its deliveries also fell 36% year over year in the third quarter. The company recently cut its full-year production target to 47,000 to 49,000 units, although it expects to deliver 50,500 to 52,000 units this year.
The focus now, however, will likely shift away from Rivian's numbers to its growth plans and product pipeline. Its joint venture with Volkswagen not only validates Rivian's EV technology, but also infuses it with cash that should help the EV maker scale up its production capacity faster and launch new products as planned. It's no surprise that the EV stock is sizzling hot today, what with shares still trading nearly 50% below their 52-week high, as of this writing, even after today's big jump.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
