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Rivian Cars (Nasdaq:RIVN) shook up some tremors across the electric vehicle sector with its announcement that the company will form a joint venture with Volkswagen (OTCPK:VLKAF) (OTCPK:VWAGY).
Volkswagen (OTCPK:VLKAF) $5B Initial and Planned Investments, Plus Rivian (RIVN)) Current Cash Position It is expected to provide capital to fund the electric vehicle maker’s operations through its R2 ramp in Normal, Illinois and its mid-cap platform in Georgia, which are viewed as offering a path to positive free cash flow and significant volume.
“This partnership brings Rivian’s software and Regions electronics platform to a broader market through the Volkswagen Group’s global reach,” noted RJ Scaringe, CEO of Rivian (RIVN).
Early reaction from analysts is that Volkswagen’s ( OTCPK:VLKAF ) investment will give Rivian (RIVN) greater flexibility as it grows toward profitability. While the joint venture does not involve collaboration between the two companies on electrical devices, engines, batteries and vehicle platforms, the development of next-generation software-defined vehicle platforms could be shared with other companies. “Although this announcement represents a vote of confidence in Rivian, we believe it does little to change the company’s operating issues and alarming cash burn rates, which amounted to about $1 billion in the quarter,” CFRA’s Garrett Nelson warned. He added: “The key question is why VW would make such an investment in a struggling electric car manufacturer that may face continued risks in the future, but it is clear that VW sees value in access to RIVN’s vehicle architecture and software.”
Shares of Rivian Automotive (RIVN) jumped. 49.9% In aftermarket trading, after gaining 8.6% during the regular session. The electric vehicle stock is still trading well below its IPO pricing level of $78 as of 2021 and is closing at an all-time high of $172.01.
Sector monitoring: The withdrawal of major automakers from aggressive electric vehicle strategies has heightened speculation that partnerships may become more common. Morgan Stanley has assumed that one option for legacy automakers is to pull back the collaboration arm. General Motors (GM), Ford Motor (F), and Stellantis (STLA) could work with China, work with EV startups, work closely with each other, or even work with Tesla (TSLA) on a licensing or supply deal. . This strategy will represent a reversal from the previous plan to imitate Tesla (TSLA) through massive upfront proprietary investments in the supply chain, unique manufacturing capabilities, end-to-end software development, internal battery sourcing, and downstream infrastructure. It is worth noting that Tesla (TSLA) CEO Elon Musk said last year that the company was in talks with another major automaker about licensing its full self-driving software. Some analysts believe aggressive moves by NIO (NIO) in Europe could be a precursor to a major partnership there with a local player.