German car manufacturing giant Volkswagen (VW) has announced it will invest up to $5bn (£3.94bn) in Tesla rival Rivian.
The deal creates a joint venture that will allow VW and the US electric vehicle (EV) maker to share technology.
Rivian shares jumped nearly 50% after the announcement.
The tie-up comes as competition among electric vehicle manufacturers intensifies and Western countries move to impose tariffs on Chinese imports.
Under the terms of the deal, VW said it would initially invest $1 billion in the electric truck and SUV maker, with an additional $4 billion invested in the company by 2026.
Founded in 2009, Rivian has yet to post a quarterly profit. In the first three months of 2024, the company lost $1.5 billion.
VW, like other auto industry giants, is under pressure from rivals like Tesla and China’s BYD as it tries to move away from fossil fuel-powered vehicles.
Meanwhile, some electric vehicle startups have struggled to make headway in a highly competitive market and as rising interest rates weighed on demand for large purchases.
The partnership will give VW immediate access to Rivian’s software, allowing the German automaker to use it in its cars.
Auto industry giants like VW also face growing competition from Chinese electric vehicle makers, which are expanding globally.
Earlier this month, The European Union (EU) has warned it will increase tariffs on Chinese imports of electric vehicles by up to 38%..
Chinese and European officials held talks ahead of July 4 deadline.
A months-long investigation by the European Commission found that Chinese electric vehicle companies had been “unfairly subsidized”.
In response, China said the tariffs violated international trade rules and called the investigation “protectionism.”
The plan came just a month after the United States announced it would raise import tariffs on Chinese electric vehicles from 25% to 100%.
This week, Canada said it was considering a similar move to align with its allies.
