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Rivian shares jump on Volkswagen deal

Thursday, June 27, 2024

Today’s headlines

What’s happening: Shares of Rivian Automotive surged on Wednesday on news of its partnership with Volkswagen.

What happened: Volkswagen agreed to invest up to $5 billion in Rivian Automotive, a move that has the potential to change the EV landscape.

However, shares of Volkswagen declined after the announcement on cost concerns.

Why it matters: The partnership with Volkswagen would help Rivian Automotive compete better with EV behemoths like Tesla.

There is currently a wide gap between the technologies used by traditional automakers and new-age companies like Tesla. Some modern cars have as many as 150 ECUs (electronic control units) for controlling different functions, such as power windows, keyless entry, automatic airbags, infotainment, and battery management.

Traditional automakers have so far been purchasing smart vehicle technology from third-party companies, which spells higher costs and longer time to market.

The partnership, which would give Volkswagen access to Rivian Automotive’s engineering expertise, is aimed at enhancing the German automaker’s EV capabilities by overcoming challenges in electrification, especially in software development. “Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost,” Volkswagen CEO Oliver Blume said in a statement on Tuesday.

The agreement gives Rivian Automotive a new lease of life. The California-based company has been struggling with profitability. Even after achieving record automobile production and delivery in the final quarter of 2023, the company remained in the red, with as much as $600 million in losses.

Shares of Rivian Automotive jumped 23.24% to settle at $14.74 on Wednesday, adding nearly $3 billion to its market value. Volkswagen’s stock shed 1.64% to close trading at €104.80 on concerns around the cost and uncertainties associated with the joint venture.

What to watch: Investors will monitor the collaboration between Volkswagen and Rivian Automotive, given the difference in the strategies and culture of the two companies. Markets will also watch the adoption of new technologies by Volkswagen.

The markets today

The British pound will be in focus ahead of a basket of major economic reports

Context: The GBP/USD forex pair edged lower on Wednesday, breaching the 1.2700 support level.

Details: The British pound has outperformed its major peers against the US dollar so far this year, backed by better-than-feared economic data. The sterling has also been supported by the Bank of England remaining cautious in cutting interest rates.

However, the uncertainties around the elections on July 4 exerted pressure on the British pound. Traders now widely expect the BoE to begin cutting interest rates at its August meeting, another dampener for the sterling.

Strength in the US dollar also drove the GBP/USD forex pair lower. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose 0.44% to 106.07 on Wednesday.

The US dollar has recently been buoyed by hawkish comments from Federal Reserve Governor Michelle Bowman, who said interest rates could remain at the current level “for some time” to bring inflation under control.

UK’s car production declined by 11.9% year-on-year to 69,652 units in May, recording a contraction for the third straight month.

The GBP/USD forex pair fell close to 1.2600 on Wednesday. The FTSE 100 shed 0.27% to settle at 8,225.33.

What to watch: Investors await the release of economic data on GDP growth and current account deficit from the UK tomorrow. Analysts expect the UK to report 2% GDP growth for Q1, after its economy contracted by 2% in the previous quarter.

The country’s current account deficit, which had risen to £21.18 billion in Q4, is expected to ease to £17.60 billion in Q1.

Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, Nasdaq 100, and S&P 500 up by 0.04%, 0.49%, and 0.16%, respectively.

The news shaping the markets

The US charged a 22-year-old Russian with conspiring to hack computer systems in Ukraine. The news sent the RUB/USD slightly lower in forex trading this morning.


Japan’s retail sales grew by 3% year-on-year in May, versus a 2.4% gain in April. The figure significantly exceeded market expectations of 2% growth, lending support to the JPY/USD forex pair.


Australia’s consumer inflation expectations climbed to 4.4% in June, from a two-and-a-half year low of 4.1%. Despite elevated cost pressures, the AUD/USD rose in forex trading this morning.


China’s industrial firm profits grew by 3.4% year-on-year to 2,754.38 billion yuan in the first five months of 2024, below the 4.3% gain in the prior period, exerting pressure on the CNY/USD forex pair.


Korea’s business confidence index rose to 78 in June, from 74 in the prior month. This being the highest reading since August 2022 sent the AUD/USD slightly higher in forex trading this morning.

What else to watch today

Brazil’s producer price index, Mexico’s balance of trade, unemployment rate and interest rate, Canada’s average weekly earnings, US durable goods orders, GDP growth, initial jobless claims, wholesale inventories, PCE prices, corporate profits, real consumer spending and pending home sales, and Argentina’s consumer confidence.


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