Volkswagen (VW), the giant German automaker, has announced plans to spend up to $5 billion (£3.94 billion) in Rivian, a rival to Tesla.
Through the agreement, VW and the US-based manufacturer of electric vehicles (EVs) would be able to share technologies through a joint venture.
Shares of Rivian surged by nearly 50% after the declaration.
The partnership comes as Western nations seek to put taxes on Chinese goods and as the competition between EV manufacturers heats up.
VW stated in the agreement that it will invest $1 billion in the electric truck and SUV manufacturer initially, and an additional $4 billion by 2026.
Rivian was established in 2009 and has not yet reported a quarterly profit. The business experienced a net loss of more than $1.4 billion in the first three months of 2024.
As it attempts to transition away from fossil fuel-powered vehicles, rivals like China’s BYD and Tesla have put pressure on VW, along with other major players in the auto industry.
Meanwhile, as demand for large-ticket purchases has been impacted by rising borrowing rates, some EV start-ups have found it difficult to gain traction in the fiercely competitive industry.
Through the collaboration, VW will have instant access to Rivian’s software, enabling the German automaker to incorporate it into its cars.
Chinese EV manufacturers have been posing a growing threat to global auto industry heavyweights like Volkswagen.
The European Union (EU) issued a warning earlier this month, threatening to increase duties on Chinese electric vehicle imports by up to 38%.
Ahead of the deadline on July 4, officials from China and the EU have had discussions.
The European Commission concluded after a months-long investigation that Chinese electric vehicle producers had received “unfair subsidization.”China responded by claiming that the probe was “protectionism” and that the taxes broke international trade regulations.
Just one month prior, the US announced that import taxes on Chinese electric vehicles would rise from 25% to 100%.
Canada announced this week that it was thinking of taking a similar action to stand with allies.
Tesla announced separately on Tuesday that it would recall the majority of its Cybertrucks shipped in the US due to problems with the outside trim and windshield wipers.
More than 11,000 of the cars, which went on sale at the end of November of last year, are covered by the recalls.
