Volkswagen Group (VW) and Tesla rival Rivian have formed a joint venture, as the German car giant has increased investment in the partnership.
The two companies say the deal is now worth $5.8bn (£4.55bn) – up from the original $5bn pledge made by VW.
Shares in the US electric vehicle (EV) maker jumped more than 9% in after-hours trading following the announcement.
The merger will see the firms share critical technologies at a time of declining global demand for electric vehicles and increased competition from Chinese rivals.
The joint venture provides loss-making Rivian with an important source of cash as it prepares for the launch next year of its R2 model – a sport utility vehicle (SUV) that is smaller and more affordable than its current products.
It also means that VW will be able to use Rivian technology in their cars.
The first VW models equipped with Rivian technology are expected to be available to customers in 2027.
“By combining their complementary technologies, the two companies plan to reduce development costs and rapidly scale new technologies,” the two companies said in a statement.
Under the plan, engineers and software engineers from both companies will initially work together in California, while three other centers will be created in North America and Europe.
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