Volkswagen's $5 billion investment in electrical vehicle startup Rivian is a "catch-up move" for the German automaker, but could take years to pay off, according to Cyrus Mewawalla, head of thematic intelligence at GlobalData.
Volkswagen and Rivian on Tuesday announced that the German auto maker would invest as much as $5 billion in Rivian in the coming years following an initial $1 billion investment.
Rivian shares were up 42% in premarket trading on Wednesday.
"Volkswagen has fallen behind in two areas, on electric vehicles themselves, but also on autonomous driving and other software within the car.
The investment will therefore help Volkswagen in these areas, but the firm is notably behind in the electric vehicle space, he added.
Persons:
Cyrus Mewawalla, Mewawalla, CNBC's
Organizations:
Volkswagen
Locations:
Rivian, Europe, London