German automaker Volkswagen (VW) intends to invest up to $5 billion in Tesla competitor Rivian. As the BBC reports, the agreement creates a joint venture in which VW and American electric car maker Rivian will be able to share their technological know-how.

Rivian shares exploded 50% after the developments.

The deal calls for VW to initially invest $1 billion in the electric truck and SUV maker, followed by $4 billion through 2026.

Founded in 2009, Rivian has yet to turn a profit on a quarterly basis. For the first quarter of 2024, it even recorded losses of over 1.4 billion dollars.

VW, as well as other car giants, is under pressure from rivals such as Tesla and China’s BYD in its push to make the transition from fossil fuel-powered vehicles to electric vehicles.

The benefits for VW

The deal will give VW direct access to Rivian’s software, allowing it to use it in its cars. Auto giants such as VW are also facing intensifying competition from Chinese electric vehicle makers, which are expanding globally.

It is recalled that a few days ago the European Union warned that it would increase tariffs on imported electric vehicles from China by 38%. Officials from the EU and China are in talks ahead of a July 4 deadline to implement the increased tariffs. And all of this comes in the wake of an investigation by the European Commission which found that Chinese electric vehicle manufacturing companies have benefited from an “unfair” subsidy.

China said the tariffs violated international trade rules and called the commission’s investigation “protectionism.”