"Tesla's rival" Rivian surged more than 50% after hours, Volkswagen plans to invest $5 billion

German automotive giant Volkswagen Group announced plans to invest up to $5 billion in the U.S. startup electric vehicle company Rivian Automotive, known as the "Tesla rival," to jointly establish a joint venture, sharing electric vehicle architecture and software technology.

In response to this news, on Tuesday, June 25th, Rivian surged more than 50% in after-hours trading on the U.S. stock market. Prior to this, Rivian had already closed up 8.63% on Tuesday, while Volkswagen's U.S. stock also closed slightly up by 0.49%.

It is reported that Volkswagen Group will initially invest $1 billion in Rivian and plans to invest an additional $4 billion, with a total transaction size of $5 billion. The investment is divided into two parts, with Volkswagen using $2 billion to establish a jointly controlled software company with Rivian. The two parties currently expect the joint venture company to be established in the fourth quarter of 2024.

The joint venture company is expected to leverage Rivian's industry-leading software and electrical architecture to create a top-notch software-defined automotive technology platform, which will be used by both companies to produce their respective vehicles. Analysts point out that the two companies are expected to combine complementary advantages, reduce the cost of each vehicle, and help Volkswagen strengthen its software division to address previous quality control issues. Rivian also stated that the price of the new vehicle will be cheaper than the current starting price of $70,000.

In addition to establishing a software company, Volkswagen also plans to invest $3 billion in purchasing Rivian's shares over the next few years, initially injecting $1 billion through an unsecured convertible bond to Rivian. Then, in 2025 and 2026, Volkswagen will purchase Rivian's common stock in two installments of $1 billion each