Volkswagen Group (VW) has expanded its partnership with Rivian, increasing its investment in a joint venture now valued at $5.8 billion, up from an initial $5 billion commitment.

This deal comes as Rivian, a key competitor to Tesla in the electric vehicle (EV) market, faces increased competition and slowing sales growth. Following the announcement, Rivian's shares rose by more than 9% in after-hours trading.

The collaboration aims to enhance the sharing of critical technologies between the two companies, providing Rivian, which has been struggling financially, with much-needed funding as it prepares to launch its new, more affordable R2 SUV model in 2025. The move underscores VW's strategy to bolster its presence in the increasingly competitive EV market, where Chinese manufacturers are also gaining ground.

The partnership highlights the shifting dynamics in the EV sector, where automakers are pooling resources to remain competitive in a fast-evolving market.

Volkswagen (VW) has also gained access to Rivian’s technology for use in its own vehicles, with the first VW models incorporating Rivian tech expected by 2027.

The collaboration aims to leverage the complementary strengths of both companies, allowing them to reduce development costs and accelerate the adoption of new technologies.

The initiative will see engineers and software developers from both companies working together in California, with additional facilities planned in North America and Europe.

The venture comes at a time when expectations are rising that VW, Europe's largest automaker, is set to announce significant cost-cutting measures.

The company, which also owns brands like Audi, Lamborghini, and Porsche, has been grappling with rising costs, competitive pressure from Chinese electric vehicle makers, and challenges in transitioning away from petrol and diesel vehicles.

This partnership, along with the anticipated restructuring, reflects VW’s response to a rapidly shifting automotive landscape, where technological innovation and cost efficiency are critical to staying competitive.

In response to weakening demand for electric vehicles (EVs), Rivian has been taking steps to reduce costs and improve efficiency. The EV startup, which is still not profitable, has been renegotiating contracts with suppliers and streamlining its manufacturing processes to better navigate the challenging market conditions.

Rivian, which manufactures both electric SUVs and delivery vans, is particularly focused on its electric vans that are primarily supplied to Amazon, the company's largest shareholder.

Amazon has placed an order for 100,000 of these vehicles, all set for delivery by the end of the decade. This contract with Amazon remains a key part of Rivian's strategy as it works to stabilize its operations amidst the broader EV industry slowdown.