The electrical automobile (EV) trade has not been significantly type to traders, particularly those that guess on Rivian Automotive (NASDAQ: RIVN). Its shares have misplaced round 90% of their worth since going public three years in the past amid rising competitors and missed manufacturing targets. However some latest excellent news have given the shares a raise. Let’s dig deeper into Rivian’s just-announced partnership with Volkswagen and what it may imply for the struggling automaker. The Volkswagen deal On June 25, Rivian and Volkswagen introduced plans to create a three way partnership to develop EV software program and applied sciences for his or her respective automotive companies.The brand new entity can be equally owned by each firms. However as a part of the deal, Volkswagen will take a $1 billion fairness stake in Rivian, make investments a further $2 billion in Rivian shares in 2025 and 2026, and put $2 billion into the three way partnership by means of a mix of money funds and loans. In whole, the deal is value $5 billion, with virtually all the cash popping out of Volkswagen’s pocketbook.This settlement is one other vote of confidence in Rivian’s expertise and analysis capability. And Volkswagen will be part of blue chip firms like Amazon and Ford Motor Firm, which even have fairness stakes in Rivian. The deal may also probably cut back Rivian’s software program price per automobile by means of economies of scale, and Volkswagen appears to be footing a lot of the invoice.Volkswagen’s new fairness stake in Rivian will dilute current shareholders, technically lowering their declare on the corporate’s future earnings. However dilution is not essentially unfavorable when the brand new capital is used to create worth, and that definitely appears to be the case right here. Rivian’s shares have risen by over 20% in response to the announcement.How does this match into Rivian’s long-term outlook?Rivian is in a tough place. Macro-level challenges like excessive rates of interest, rising competitors, and shopper hesitation are battering the EV trade. And even large gamers like Ford’s Mannequin E phase (which misplaced $1.3 billion within the first quarter) will not be immune from the challenges.Picture supply: Getty Photographs.However not like Ford Mannequin E, Rivian is a stand-alone EV enterprise that may’t depend on assist from its mum or dad firm to subsidize its working losses, which totaled $1.48 billion within the first quarter. These losses will rapidly burn by means of Rivian’s roughly $7.9 billion in money and short-term investments. The excellent news is the $2 billion Volkswagen partnership will assist handle this problem for now. However over the long run, Rivian will probably want further outdoors funding to keep up its operations.Story continuesWhile administration expects the corporate to attain its first gross revenue (income minus direct manufacturing prices) this yr, it may take a number of extra quarters to cowl overhead bills like workplace salaries, promoting, and analysis and growth and eventually finish the money burn.Is Rivian inventory a purchase?Rivian’s new partnership with Volkswagen provides extra power to the corporate’s bull thesis by giving it much-needed money within the close to time period whereas probably lowering its long-term manufacturing and analysis prices. With that mentioned, I am nonetheless not snug upgrading the inventory from an (optimistic) maintain to a purchase as a result of the way forward for the EV trade stays unsure, even for big trade gamers. As an unprofitable firm, Rivian will wrestle to compete in opposition to its extra well-capitalized rivals. And traders could need to look ahead to extra quarters of constructive knowledge earlier than taking a place within the inventory.Must you make investments $1,000 in Rivian Automotive proper now?Before you purchase inventory in Rivian Automotive, contemplate this:The Motley Idiot Inventory Advisor analyst workforce simply recognized what they imagine are the 10 finest shares for traders to purchase now… and Rivian Automotive wasn’t one in all them. The ten shares that made the reduce may produce monster returns within the coming years.Think about when Nvidia made this listing on April 15, 2005… in case you invested $1,000 on the time of our suggestion, you’d have $757,001!*Inventory Advisor supplies traders with an easy-to-follow blueprint for fulfillment, together with steering on constructing a portfolio, common updates from analysts, and two new inventory picks every month. The Inventory Advisor service has greater than quadrupled the return of S&P 500 since 2002*.See the ten shares »*Inventory Advisor returns as of June 24, 2024John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Will Ebiefung has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Amazon and Volkswagen Ag. The Motley Idiot has a disclosure coverage.Is Rivian Inventory a Purchase After the $5 Billion Volkswagen Funding? was initially revealed by The Motley Idiot