Following EV maker Rivian’s $5 billion investment from Volkswagen, the stock surges by 50%.

Following EV maker Rivian's $5 billion investment from Volkswagen, the stock surges by 50%.

Volkswagen Group and Rivian Automotive are collaborating to create software technology that will support the two companies’ efforts to produce electric cars. In after-hours trading on Tuesday, shares of Rivian surged by over 50% to almost $18 apiece, following Volkswagen’s announcement that it will spend $1 billion in the electric vehicle manufacturer initially, with ambitions to invest $4 billion by 2026.

In a statement released on Tuesday, the automakers said that by boosting “scale and speeding up innovation globally,” the joint venture will assist each of the businesses in bringing down the cost of manufacturing EVs.

 

According to the release, Rivian will license its present intellectual property rights to the joint venture, with the goal of the cooperation being to expand on the company’s software and electrical design. The notification states that both enterprises would carry on running their operations independently. The goal of all the automakers is to introduce cars with Rivian’s technology in the latter part of this decade.

The alliance may be advantageous for Rivian, which has been having difficulty reducing expenses for some months. The company said in May that it intended to “right size its business” by cutting off more than 100 workers in California. In the meanwhile, the business announced in February that it will lay off 10% of its employees.

 

Based in Irvine, California Rivian is not alone in its “mountain-like climb” to boost EV demand, which has decreased as a result of customers’ worries about high prices and the lack of charging points.

However, in an attempt to attract potential EV buyers, Rivian has been working to save its company. It said in March that it would start manufacturing $45,000 EVs at a lower cost. The announcement of the joint venture is made mere days before Rivian’s Investor Day, which is set for Thursday, June 27, at 9:00 a.m. Eastern Time.

           

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