German automaker Volkswagen Group (ETR: VOW3) has announced a major investment in US-based EV maker Rivian (Nasdaq: RIVN). The partnership, valued at up to $5 billion, aims to create a joint venture focused on sharing electric vehicle (EV) architecture and software development.

The news sent Rivian’s stock soaring by approximately 50% in after-hours trading, potentially boosting the company’s market value by nearly $6 billion. This partnership comes as EV makers face challenges amid slowing demand and traditional automakers struggle to transition to battery-powered vehicles.

For Rivian, this investment provides crucial funding for the development of its upcoming R2 SUVs, scheduled for release in early 2026, and the planned R3 crossovers. The collaboration is expected to help Rivian reduce operating costs by leveraging economies of scale in supplies and components. Additionally, the partnership aims to accelerate Rivian’s path to positive cash flow.

Volkswagen’s investment will be structured in several phases, including an immediate $1 billion convertible note, followed by additional stock purchases and a potential loan. The German automaker sees this partnership as a solution to its software development challenges, particularly in light of issues faced by its Cariad software division.

The joint venture will license Rivian’s existing intellectual property, with the R2 being the first vehicle to feature software from the collaboration. Volkswagen plans to implement this software across its brand portfolio, including Audi, Porsche, Lamborghini, and Bentley.

Industry analysts view this partnership as mutually beneficial. For Rivian, it provides financial stability and potential expansion into European and Asian markets. For Volkswagen, it offers a path to overcome software hurdles and strengthen its position in the North American EV market, particularly in the large SUV and pickup segments.

The collaboration also extends to Volkswagen’s off-road EV brand Scout, which is developing a plant in South Carolina that’s slated to produce vehicles that would directly compete with Rivian’s. 

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