Market Commentary

Rivian Shares Soar After $5 Billion Investment From Volkswagen

Aisha Khan
26 Jun 2024 · 2 minutes read

As competition in the EV market grows stronger, Germany’s Volkswagen AG (VWAGY:US) announced that it would be investing in Rivian Automotive Inc (RIVN:US) on June 26, 2024. The investment - valued up to $5 billion - marks a new joint venture for both companies. 

In response, RIVN shares surged over 50% in after-hours trading on Tuesday, just before an upcoming investor event.

Despite this boost, Rivian has faced scrutiny from Wall Street due to its high cash burn and substantial losses. The stock closed Tuesday at $11.96 per share, marking a decline of around 49% for the year 2024.

This new investment could provide the necessary funds for the development of smaller, more affordable R2 SUVs set to launch in early 2026 and planned R3 crossovers. This partnership will also help Rivian reduce operating costs by leveraging bulk supplies of chips and components, according to CEO RJ Scaringe. Founded in 2009, Rivian has long been considered a rival of Tesla Inc (TSLA:US), which is the top-performing company in the EV industry with a current market value of $587.06 billion. Rivian, on the other hand, boasts a $11.90 billion market capitalization.

According to its last quarterly report, the company produced 13,980 vehicles and delivered 13,588 in Q1 2024, surpassing expectations. This marks a 49% increase in production and a 71% increase in deliveries compared to the same period last year.

On the Congressional trading side, both Volkswagen and Rivian have not been traded by Congress since 2023. Both stocks were last sold by Rep. Daniel Goldman on July 10, 2023 and March 6, 2023 respectively in trades valued between $15,001 and $50,000. Prior to this, Rep. Ro Khanna and Rep. Jum Langevin both purchased RIVN shares on November 3, 2022 and January 21, 2022 and are presumed to be still holding the stock. 

As per a global outlook, nearly one in five cars sold in 2023 was electric. In 2023, nearly 14 million electric cars were sold, with 95% of these sales occurring in China, Europe, and the United States. Chinese companies such as BYD, the biggest global rival to America’s Tesla, are forcing Western automakers to change their approach to electric vehicles if they are to remain competitive in a growing industry. Volkswagen’s hefty investment in Rivian could thus shift the industry’s progress in U.S’s favor.