German automaker Volkswagen will invest up to $5 billion in electric vehicle startup Rivian, the companies said on Tuesday.
The two companies said they are seeking to develop "next-generation electric architecture and best-in-class software technology" for EVs through a planned joint venture.
Volkswagen and Rivian said they ultimately intend to incorporate the technology from the joint venture into new vehicles that the companies plan to put out "in the second half of the decade."
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For the partnership, Volkswagen will pour $1 billion into Rivian this year via an unsecured convertible note. That, the companies said, will later be followed by $4 billion by 2026.
The joint venture, which Volkswagen and Rivian will have equal ownership and control over, is expected to be fully formed in the final quarter of the year, the companies said.
"Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership also is expected to help secure our capital needs for substantial growth," Rivian CEO RJ Scaringe said.
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Rivian’s current lineup includes the R1T pickup and R1S SUV, with R2 and R3 platforms in the pipeline. The startup has been working on trimming costs through various measures and boosting its capital as it seeks to bring the new platforms to market.
Volkswagen Group CEO Oliver Blume, meanwhile, said it will be "strengthening our technology profile and our competitiveness" through the joint venture.
The German automaker will gain access to Rivian’s "existing electrical architecture and software platform" and see benefits to "accelerate" its software-defined vehicle and other plans.
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Rivian shares were up more than 25% during midday trade on Wednesday.
The company told investors in May it expects to build 57,000 vehicles this year.
