11:56 AM EDT, 06/26/2024 (MT Newswires) -- Rivian's (RIVN) announcement that it will get an investment from Volkswagen is "meaningfully positive" and will help it to achieve the scale necessary to get to positive free cash flow, BofA Securities said in a Wednesday note.

Rivian said late Wednesday it will get up to $5 billion from Volkswagen to create an equally-controlled joint venture to share electric vehicle architecture and software. Volkswagen will initially invest $1 billion before the end of the year.

"We have assumed RIVN would need to raise more capital, and VW's investments in RIVN will prove valuable in helping it achieve the scale necessary to get to positive free cash flow," BofA said.

Also, Volkswagen's investment should provide Rivian with "access to capital to not only fund the ramp-up of production of the R2 at its Normal, IL facility but also to build a new facility in Georgia for its mid-size vehicle platform," the note said.

Rivian may also see "potential benefits from material cost savings and operating efficiencies that would help improve its cost position and ultimately higher gross margins," BofA said, reiterating its buy rating on the stock.

Rivian shares were rising past 27% in recent trading.

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