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Rivian Automotive and Volkswagen Group are joining forces as they look to develop software technology that will help drive their production of electric vehicles.
Shares of Rivian jumped by more than 50% in after-hours trading Tuesday to above $18 per share after Volkswagen said that it would initially invest $1 billion in the EV maker, with plans to invest $4 billion by 2026.
The automakers said in a statement on Tuesday that the joint venture will help each of the companies lower the cost of producing EVs by increasing “scale and speeding up innovation globally.”
The partnership aims to build on Rivian’s current software and electrical architecture, the statement said, noting that Rivian will license the existing intellectual property rights to the joint venture.
Both of the companies will continue to operate their businesses separately, according to the announcement. Each of the automakers are aiming to launch vehicles using Rivian’s technology during the second half of the decade.
The partnership could bode well for Rivian, which has been struggling for months to cut costs. In May, the company said that it would be laying off over 100 of its employees in California as it looked to “right size its business.” Meanwhile in February, the company said that it would slash 10% of its workforce.
Irvine-California-based Rivian isn’t alone in its “mountain-like climb” to increase EV demand, which has fallen due to concerns from consumers over high costs and accessibility of charging stations.
Nonetheless, Rivian has been trying to salvage its business in hopes of capturing the attention of would-be EV owners. In March, it said that it would be producing cheaper EVs, with a price tag of $45,000.
The joint venture announcement comes just days ahead of Rivian’s Investor Day event, which is scheduled to take place on Thursday, June 27, at 9am ET.