The shares of electric car maker Rivian surged 23.24% on Wednesday after the company announced a partnership with German automobile manufacturing giant Volkswagen.
According to the announcement, Rivian and Volkswagen will enter a “joint venture to create next generation software-defined vehicle (SDV) platforms to be used in both companies’ future electric vehicles”.
Initially, Volkswagen will contribute $1 billion to the joint venture with plans to invest a further $4 billion through 2026 to bring the total investment to $5 billion.
The two companies said they expect to benefit from the technology developed by the joint venture in the second part of the decade. Until then, the partnership will allow Volkswagen to utilize the “existing electrical architecture and software platform” from Rivian.
Volkswagen’s investment will improve Rivian’s financial situation and bring an influx of badly-needed cash for the company that has been recording significant losses on every car it made and sold. Rivian recently shared details about its cost-cutting strategy, which saw the company tweak its manufacturing process and streamline production.
After the news about the partnership with Volkswagen made the headlines, Rivian’s stock went on a massive surge. The company’s shares have closed at $14.74 per share, which represents a 36.67% growth in the last five days. However, the stock is still 30.14% down year-to-date.