01:39 PM EDT, 06/26/2024 (MT Newswires) -- Rivian Automotive's ( RIVN ) planned joint venture with German car manufacturer Volkswagen Group is likely to be a "game changer" for the US electric vehicle maker, Wedbush Securities said Wednesday.

Late Tuesday, the companies said they planned to form a joint venture to create new software-defined vehicle platforms, to be used in their future EVs. Volkswagen initially intends to invest $1 billion in Rivian, with up to $4 billion in planned additional investment as part of the deal.

Rivian expects the partnership to notably expand market applications for its software and related zonal electrical architecture and create a "robust" capital roadmap to support future growth, Chief Executive RJ Scaringe said on a conference call late Tuesday, according to a Capital IQ transcript. "We believe the opportunity ahead is significant."

The company's shares were up nearly 24% in Wednesday afternoon trade.

The partnership will help bring "the best solutions to our vehicles faster and at lower cost," Volkswagen CEO Oliver Blume said in a statement. Rivian and Volkswagen plan to roll out vehicles taking advantage of the technology created within the joint venture in the second half of the decade, the companies said.

"This is a core game changer for Rivian and changes the capital structure of the company looking ahead for the story and (Wall Street's) view at a key time," Wedbush analysts, including Daniel Ives, said in a Wednesday note to clients. The partnership is expected to provide the company the capital required for the ramp of its R2 vehicles, as well as for its midsize EV platform at its plant in Georgia, the analysts wrote.

In addition to the $5 billion of capital proceeds, Rivian expects incremental benefits via "material" cost savings, operating expense efficiencies and future revenue opportunities tied to the joint venture, Chief Financial Officer Claire McDonough told analysts.

The companies expect the completion of the joint venture formation in the fourth quarter.

"While this is an exciting announcement for us to see, in the eyes of the Street, the focus will still remain mostly on the R1 execution plans, production, optimization, the Georgia plant, and the profitability story for Rivian over the next (quarter to 12 months)," the Wedbush analysts said.

The brokerage raised its price target on the EV maker's stock to $20 from $15 while maintaining its outperform rating.

Price: 14.45, Change: +2.49, Percent Change: +20.78