According to Reuters, on November 12, German automaker Volkswagen Group and U.S. electric vehicle startup Rivian announced that Volkswagen will step up its investment in Rivian, adding 16% to $5.8 billion, to launch their planned joint venture to jointly develop electric vehicle architecture and software.

The two companies said their joint venture, Rivian and VW Group Technology LLC, aims to integrate advanced electrical infrastructure and Rivian’s software technology to support their future electric vehicles in all relevant model segments, including subcompact cars.

Volkswagen Group plans to invest $5.8 billion in Rivian and its joint ventures by 2027, including the first $1 billion in convertible notes.

The Volkswagen Group will invest $1.3 billion in intellectual property licensing and equity, and up to $3.5 billion in future equity, notes and debt, all tied to specific milestones, analysts said.

Analysts said the joint venture with Rivian could help alleviate problems experienced by Volkswagen Group’s own software unit, Cariad. Cariad has been plagued by product delays and losses since its inception.

Wassym Bensaid, Rivian’s chief software officer, and Carsten Helbing, Volkswagen Group’s chief technical engineer, will lead the joint venture. Developers and engineers for the joint venture will initially be based in Palo Alto, California, with three additional locations under development.

Rivian is planning to launch a smaller and more affordable R2 SUV. The joint venture will leverage Rivian’s existing technology to launch Rivian’s R2 model in the first half of 2026 and possibly a Volkswagen Group model as early as 2027.

RJ Scaringe, CEO of Rivian, said: “This partnership and transaction with Volkswagen Group provides Rivian with financial security. This will not only ensure a smooth R2 launch at Rivian’s plant in Normal, Illinois, but also ensure a smooth R2 launch and production increase at our plant in Georgia, USA, and enable Rivian to achieve positive cash flow.”