Volkswagen is investing $1 billion in Rivian, giving the German auto giant access to the American electric car maker's software and platforms in a new joint venture.
Over time, Rivian will receive an additional $4 billion, bringing the total to $5 billion.
Volkswagen and Rivian own shares in the joint venture. The two companies said they would display cars developed as part of the joint venture in the second half of the decade.
When announcing the new project, Rivian's CEO noted that the investment will help the company launch the next generation of its R2 electric car starting in 2026.
The R2 is said to be cheaper than the current R1T and R1S luxury electric cars.
The partnership brings Rivian's architecture, now available through updated second-generation R1 vehicles as well as vehicle software, to a broader market, the companies said.
Rivian is one of the few companies that uses Zone Architecture for its vehicles, which relies on fewer electrical controls than usual.
Volkswagen Group CEO Oliver Blume said all of the company's brands could benefit from the partnership with Rivian, including electric vehicle startup Scout Motors, which plans to launch a new line of electric trucks in the United States.
Like other companies that only make electric vehicles, Rivian has struggled during a period of declining demand for electric vehicles.
Rivian's sales are up but losses have also increased, and the company has $8 billion in cash, although it admits it may need to cut spending if it wants to remain stable.
Meanwhile, Volkswagen is going through its own electric vehicle troubles. Despite the declining market share in North America, electric models are selling well. The software has been plagued by bugs and customer complaints.
It should be noted that Volkswagen is not the first car company to work with Rivian.
The company had planned to develop an electric SUV with Ford, but this project was canceled due to the Corona virus pandemic.
Ford invested $500 million in Rivian and $700 million in Amazon.