Rivian 's latest partnership with Volkswagen could prove a major boon for investors and the broader auto industry, according to some Wall Street analysts. The electric vehicle company and Tesla competitor surged as much as 30% Wednesday, a day after announcing up to $5 billion in funding from German automaker Volkswagen . As part of the plan, Volkswagen will inject $1 billion, followed by an additional $4 billion investment planned by 2026.
The joint venture will work toward creating electrical architecture and software, the companies said. Rivian shares have hit a roadblock in recent months, shedding 34% year to date as the company grapples with rising market competition from China, slowing demand and struggles with attaining positive cash flows. RIVN 1D mountain Shares pop on Volkswagen venture But Wall Street views the deal as a potential turnaround opportunity that can help limit execution risks and uncertainties surrounding funding that have spooked investors in recent months.
"We have assumed RIVN would need to raise more capital, and VW's investments in RIVN will prove valuable in helping it achieve the scale necessary to get to positive free cash flow," and build new facilities, said Bank of America analyst John Murphy. "RIVN could also see potential benefits from material cost savings and operating efficiencies that would help improve its cost position and ultimately higher gross margins." JPMorgan analyst Ryan Brinkman lifted his price target on shares to $14 from $.
