What Happened?

Shares of electric vehicle manufacturer Rivian (NASDAQ:RIVN) jumped 8.5% in the afternoon session as auto companies with significant manufacturing local presence became more favored after US President Donald Trump announced a 25% tariff on all vehicles imported into the United States. Rivian manufactures its cars in the United States. While this does not necessarily mean the company sources all its components and raw materials domestically, the stock's positive reaction indicates that investors view the company as better positioned to adapt to the new tariffs compared to its competitors.

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What The Market Is Telling Us

Rivian’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 4 months ago when the stock gained 21.3% on the news that the company announced a joint venture with vehicle manufacturer Volkswagen valued at up to $5.8 billion, starting November 13, 2024. The joint venture was expected to help both companies develop next-generation electrical architecture and software technology for electric vehicles, covering all relevant vehicle segments, including subcompact cars. 

As a part of the deal, Volkswagen Group planned to invest up to $5.8 billion in Rivian and the joint venture by 2027. Volkswagen Group already made an initial investment of $1 billion in the form of a convertible note. Upon closing the joint venture, Volkswagen Group was expected to invest an additional $1.3 billion for IP licenses and a 50% equity stake in the joint venture. The rest of the investment, up to $3.5 billion, was expected to be a blend of equity, convertible notes, and debt at future dates based on clearly defined milestones. 

Overall, the deal highlighted a unique opportunity for Rivian to improve the scale and efficiency of its operations using shared insights and resources from a brand like Volkswagen which has a broad market presence and respectable expertise.

Rivian is down 0.5% since the beginning of the year, and at $13.19 per share, it is trading 27.2% below its 52-week high of $18.11 from July 2024. Investors who bought $1,000 worth of Rivian’s shares at the IPO in November 2021 would now be looking at an investment worth $130.94.

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