Volkswagen Group plans to invest up to $5 billion in electric vehicle startup Rivian, starting with an initial investment of $1 billion. The additional $4 billion is expected by 2026, with $1 billion each in 2025 and 2026, and $2 billion in 2026 related to a joint venture for electrical architecture and software technology, according to a release by the automakers on Tuesday. Shares of Rivian soared more than 50% during after-hours trading on Tuesday, two days ahead of an investor event. Rivian has faced pressure from Wall Street due to its cash burn and significant losses. 

The initial $1 billion from Volkswagen will be in the form of a convertible note, which could be converted to Rivian shares on or after December 1. Rivian CEO and founder RJ Scaringe expressed that this deal will aid Rivian in becoming cash flow-positive and support the production ramp-up of its smaller R2 SUVs at its Illinois plant starting in 2026. Volkswagen plans to utilize Rivian’s electrical architecture and software stack for vehicles starting in the second half of the decade. The joint venture, expected to close in the fourth quarter of this year, will be led by a balanced leadership group with Rivian appointing the technical leadership and Volkswagen appointing a chief operating officer.