- Rivian and Volkswagen to form joint venture for platform, software, electrical architecture technology.
- Volkswagen will immediately invest $1 billion for convertible note.
- Rivian will supply IP licenses to the joint venture.
- Up to $5 billion in funding will give Rivian the ability to ramp up production on R2, R3 SUVs.
This was exactly what Rivian (RIVN) shareholders needed to hear. On Wednesday, Volkswagen (VWAGY) announced that it would be investing as much as $5 billion in an automotive software and engineering joint venture with Rivian.
Rivian appears to be ahead of the curve in regard to vehicle architecture, and the work created via the partnership will eventually become part of both companies’ electric vehicle (EV) offerings. The news sent RIVN stock up as much as 36% on Wednesday morning, but many shareholders took the opportunity to take profits after the stock had fallen some 50% this year up to that point.
Rivian stock news
Though the partnership is headlined as a joint venture, the deal basically gives Volkswagen access to Rivian intellectual property for the price of $5 billion. This helped the market more richly value Rivian since it is being courted by the second-largest automaker in the world.
With a market cap of $14 billion, Rivian sold a little over 50,000 vehicles in 2023. During that same year, the $60 billion market cap Volkswagen sold 9.2 million vehicles, just 1 million behind the global leader, Toyota.
But it appears that Volkswagen believes Rivian has built a better platform for electric vehicles, as well as the electrical components of its EV platform.
The partnership begins with Volkswagen paying $1 billion for a convertible note that will convert into Rivian common stock at a future date. Then the German automaker will invest up to $4 billion through 2026. For its part, Rivian will license its technology to the joint venture.
Volkswagen mentioned Rivian’s “zonal hardware design” and its unique electrical architecture as part of the shared licensing. Most importantly, Rivian’s “next generation software-defined vehicle (SDV) architectures” will be made available to Volkswagen.
This type of agreement would seem to set up Rivian for a simple acquisition by Volkwsagen in the future since both parties are agreeing to build vehicles using the same platform.
"Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it’s exciting that one of the world's largest and most respected automotive companies has recognized this," CEO RJ Scaringe said in a statement.
The funding will provide Rivian with the runway to achieve its production goals with the R2 and R3 SUVs over the next several years.
EV stocks FAQs
Electric vehicles or EVs are automobiles that use rechargable batteries and electric motors to accelerate rather than internal combustion engines (ICEs). They have been around for more that 100 years, but battery technology research & development was meager for much of the 20th century. Lithium-ion battery technology became advanced enough to produce EVs at scale in the late 1990s and 2000s, and sales have been steadily increasing since then Tesla’s Roadster was unveiled in 2008. EVs are viewed as a means of reducing carbon emissions since battery electric vehicles (BEVs) themselves produce zero emissions. Other vehicles called plug-in hybrid electric vehicles (PHEVs) utilize both battery electric power and ICEs as a backup.
EVs are growing from a small base, but they rose from 9% of global new auto sales in 2021 to 14% of the total in 2022. This was a 65% YoY growth rate, and the industry delivered 10.2 million EVs worldwide in 2022. Projections show this number climbing above 16 million in 2023. Across the world, market shares differ greatly among nations. Nearly 88% of Norwegian new car sales in 2022 were EVs. On the other hand, the United States, where much of the modern innovation in EVs was forged, had less than 8% of new vehicle sales go to EVs in 2022. The largest EV market in the world, China, saw 30% of the market go to EVs that year.
We know you’re thinking Elon Musk, but he’s probably more like the father of the mass-market, contemporary EV. All the way back in 1827, a Hungarian priest named Anyos Jedlik invented the electric motor and used it the following year to power a vehicle of sorts. French scientist Gaston Planté invented the lead-acid battery in 1859, and German engineer Andreas Flocken built the first true electric car for the public in 1888. EVs made up about 38% of all vehicles sold in the US around 1900. They began losing market share rapidly after 1910 when gasoline-powered vehicles grew much more affordable. They largely died off until new research programs in the 1990s led to gradual private sector investment in the 2000s.
China’s BYD is by far the largest manufacturer of EVs in the world. In 2022 it sold 1.8 million EVs and in the second half of the year made up 20% of the global market. The asterisk given to BYD is that the vast majority of these vehicles are hybrids. Tesla’s 12% market share is often treated as more significant than BYD, because it only sells BEVs and is the most famous EV brand in the world. Volkswagen, BMW and Wuling then round out the top five. As a new sector with heavy investment though, many startups have flooded the market. These include China’s Nio, Li Auto and Xpeng; a Swedish-Chinese manufacturer called Polestar; and Lucid and Rivian from the US.
Rivian stock forecast
Rivian stock hit a daily high of $16.35, far above the Tuesday close at $11.96. The stock closed the session at $14.74, up 23.2%. RIVN stock rose in the late afternoon after reaching a daily low of $14.17.
It's a good sign that shares of EV automaker gained toward the end of the session. This means there might be further buying in Thursday's session as well. The price dynamics tell us that the day's news was no flash in the pan.
The closing price is in line with support from February near $14.70. Unfortunately, Rivians stock closed below the support band range from $15.00 to $15.80 that held up off and on from January 2023 through February of this year. Regaining $15.00 is the main priority for bulls before retaking the 200-day Simple Moving Average (SMA), now at $15.19.
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