Volkswagen becomes the second legacy automaker to invest in the California-based company.

Volkswagen plans to invest up to $5 billion in electric vehicle startup Rivian, beginning with an initial $1 billion investment. The additional $4 billion will follow, with $1 billion each in 2025 and 2026, and $2 billion in 2026 for a joint venture on electrical architecture and software technology, according to a release by the automakers Tuesday.

Rivian shares surged 40% in after-hours trading on Tuesday, ahead of an investor event. The stock closed at $11.96, down 49% in 2024. Volkswagen’s initial $1 billion will be in the form of a convertible note, potentially turning into Rivian shares after Dec. 1.

Rivian's 2024 R1S
Rivian’s 2024 R1S

Rivian will host an investor call to discuss the partnership at 6 p.m. ET Tuesday.

Volkswagen is the second major automaker to invest in Rivian, following Ford Motor, which held a 12% stake before exiting in 2023. Amazon remains a significant stakeholder since Rivian’s IPO in 2021.

The Volkswagen-Rivian deal comes amid slower-than-expected EV adoption. It remains unclear how this partnership will affect Volkswagen’s $2 billion EV plant plans for Scout Motors in South Carolina.

Rivian has been cutting costs by trimming staff, improving efficiencies at its Illinois plant, and pausing construction of a new factory in Georgia, saving over $2.25 billion. The company reported a $1.45 billion loss in Q1 while preparing for its next-gen vehicles in 2026.