Volkswagen is preparing to invest $5 billion in Rivian, directly causing Rivian's after-hours trading to surge by 50%.

New energy vehicle companies in the past two years share a common characteristic: if they have a relatively good car manufacturing platform (with a history of producing popular models), possess certain intelligent R&D capabilities, and remain relatively independent without being tied to a specific traditional automaker.

When such companies face a cash flow crisis and the market prices them as having no investment value, it might actually be the turning point for a reversal. This is because these new players could catch the eye of major automakers, providing them with underlying implicit M&A value. Following XPeng and Leapmotor partnering with major automakers, and Nio securing Middle Eastern investors, Rivian once again validates this logic.

Before the news broke, Rivian's market cap was only $11 billion, so this $5 billion investment can be considered a sell-out-level financing:

A. First, a $1 billion convertible bond investment, which will mostly convert to equity after 2024; in 2025 and 2026, Volkswagen will invest an additional $1 billion annually in Rivian if specific targets are met.

B. Additionally, the two parties will establish a 50-50 joint venture to research electric vehicle electronic architectures. Volkswagen will invest $1 billion upfront, followed by a $1 billion loan to the JV in 2026. While Volkswagen appears to be the white knight rescuing cash-strapped Rivian from the brink of bankruptcy, this joint venture structure essentially means Rivian is selling its core technology to Volkswagen.