Volkswagen and Rivian Form Joint Venture, Deepening Alliance

The new agreement, which builds on an earlier announcement, calls for the German automaker to invest $5.8 billion in Rivian, a maker of electric vehicles.

Volkswagen, the German automaker, and Rivian, a California-based maker of electric pickups and S.U.V.s, said on Tuesday that they would form a joint venture to develop software and electronics, extending a partnership they announced in June.

Volkswagen said it would increase its investment with Rivian to $5.8 billion from $5 billion, which will include a 50 percent stake in the joint venture. While short of an acquisition, the new company broadens the alliance with Rivian and could foreshadow similar partnerships between other established carmakers and new companies struggling to become profitable.

“The partnership with Rivian is the next logical step in our software strategy,” Oliver Blume, the chief executive of Volkswagen, said in a statement.

In June, Volkswagen and Rivian had said they would work together on vehicle software — an area where the German carmaker has struggled. The agreement announced Tuesday goes further by creating an independent company to jointly develop technology for electric vehicles.

The ever-closer association with Volkswagen has helped allay fears that Rivian will run out of money before it becomes profitable. Rivian shares rose 6 percent in extended trading on Tuesday.

Initially the partnership will be focused on developing software for electric vehicles, but could be expanded to include battery modules or other technology, Mr. Blume said during a conference call with reporters. Volkswagen will use the technology in many types of vehicles including subcompacts and cars made by its Audi and Porsche divisions, he said.

Though the world’s second-largest carmaker after Toyota, Volkswagen has struggled to make inroads in the United States. Sales of its electric cars here have lagged behind General Motors and Hyundai-Kia. Volkswagen’s share of the electric car market in the United States was just 3.4 percent in the third quarter, including the company’s Audi and Porsche brands, according to Kelley Blue Book.

The collaboration with Rivian is Volkswagen’s second tie-up with another automaker this year aimed at strengthening its software, which has been a notoriously weak point for the German company. In February, Volkswagen announced a partnership with Chinese electric vehicle company Xpeng, aimed at helping it to develop electric cars for China, where it has been steadily losing market share.

Rivian’s pickups and sport utility vehicles have received positive reviews in the automotive press, but the company is not selling enough of them to make money. Rivian said last week that it lost $1.1 billion in the third quarter, an improvement from the same period in 2023, when it lost $1.4 billion. However, deliveries during the quarter fell to 10,000 vehicles, from 15,600 a year earlier, because of a parts shortage.

Volkswagen does not sell a pickup truck in the United States, a handicap in a market where such vehicles are best sellers. But the company is building a factory in South Carolina where it plans to revive the Scout off-road brand with a line of electric S.U.V.s and pickups. Scout will also use technology developed by the VW-Rivian joint venture.

Scout began taking reservations for the vehicles last month, but they will not be available until 2027.

In Europe and China, Volkswagen is trying to cut costs as it faces weak demand for its vehicles. The company also faces high energy and labor costs in Germany, home to many of its factories. The company said last month that its profit in the third quarter fell 42 percent to 2.86 billion euros, or $3.1 billion, its lowest level in three years.

Volkswagen has asked its 120,000 workers in Germany to accept wage cuts of 10 percent. The company has threatened to close factories there, too. The company’s main union is seeking a 7 percent wage increase and says it may resort to strikes if its demands are not met.

The new joint venture will be known as Rivian and VW Group Technology and will be led by Wassym Bensaid of Rivian and Carsten Helbing of Volkswagen. Its headquarters will be in Palo Alto, Calif.

Volkswagen’s $5.8 billion investment consists of shares in the joint venture and debt. Of that sum, $3.5 billion is conditional on the joint venture achieving “clearly defined milestones,” Volkswagen said.