By Abhirup Roy and Ben KlaymanSAN FRANCISCO (Reuters) -German automaker Volkswagen Group will make investments as much as $5 billion in U.S. electric-vehicle maker Rivian as a part of a brand new, equally managed three way partnership to share EV structure and software program, the businesses stated on Tuesday.Shares of Rivian surged about 50% in prolonged commerce after the announcement, doubtlessly supercharging the corporate’s market worth by almost $6 billion, if beneficial properties maintain on Wednesday.The auto trade faces an important time as EV startups grapple with a slowdown in demand amid excessive rates of interest and dwindling money, whereas conventional automakers wrestle to construct battery-powered automobiles and superior software program.The funding will present Rivian the funding essential to develop its inexpensive and smaller R2 SUVs which are set to roll out in early 2026 and its deliberate R3 crossovers, CEO RJ Scaringe advised Reuters.It should additionally assist Rivian, identified for its flagship R1S SUVs and R1T pickups, flip cashflow constructive. The corporate will license its current mental property rights to the JV, and the R2 would be the first automobile utilizing software program from the JV. Volkswagen automobiles, together with ones by its Audi, Porsche, Lamborghini and Bentley manufacturers, will observe.”Any money infusion like that’s large. Getting the assist of Volkswagen Group actually actually strengthens their story towards Europe and towards Asia finally,” stated Vitaly Golomb, managing companion at Mavka Capital in San Francisco, an investor in Rivian.For Volkswagen, analysts and buyers see the funding as a transfer to unravel the corporate’s struggles in software program. VW’s software program division, Cariad – arrange underneath former VW Group CEO Herbert Diess – has exceeded its funds and failed to satisfy targets. That contributed to Diess’ exit in September 2022.Volkswagen will instantly make investments $1 billion in Rivian via a word that may convert to inventory on Dec. 1, topic to regulatory approvals. Volkswagen will even make a $1 billion cost on the inception of the JV, anticipated within the fourth quarter of this yr.The German automaker will even make investments $2 billion in Rivian inventory – $1 billion every in 2025 and 2026 – topic to the startup hitting sure milestones, and supply a $1 billion mortgage in 2026.COST CUTSEven with losses of almost $40,000 for each automobile it delivers, Rivian has been on a steadier footing than different EV startups which were compelled to slash costs to stimulate demand or file for chapter, together with Fisker earlier this month.To maintain its head above water, Rivian has been slashing prices at the same time as it really works to ship its EVs on time. It has additionally been renegotiating provider contracts and constructing some components in-house.Story continuesThe firm has overhauled its manufacturing course of, which has led to a major discount in value of supplies, Scaringe advised Reuters throughout an unique tour of its facility in Regular, Illinois, final week.Rivian’s money and short-term investments fell by about $1.5 billion within the first quarter to only underneath $8 billion. Earlier than the VW deal, Rivian had stated it had sufficient capital to launch the R2 SUVs.”They have been positively going to wish one thing to get them previous the launch of the R2s. This positively helps lengthen that vary,” stated Sam Fiorani, vp at analysis agency AutoForecast Options.Rivian inventory has halved thus far this yr. Merchants have guess closely that the inventory will fall, with an equal of 18% of its shares not too long ago offered brief, in line with information from S3 Companions.LEGACYVolkswagen stated earlier this yr it was sticking with plans to launch 25 EV fashions in North America throughout its group manufacturers by 2030, even because it acknowledged slowing progress within the phase. The corporate’s shares are down round 3% thus far this yr.Mavka Capital’s Golomb stated VW shouldn’t be an enormous participant within the massive SUV and pickup segments within the U.S. and it has failed to interrupt via with its crossover electrical SUV ID4. However the partnership with Rivian offers the corporate choices, he stated.Volkswagen stated on Tuesday the Rivian software program will even be utilized by the German carmaker’s off-road EV model Scout, which is constructing a plant in South Carolina to assemble pickups and SUVs that will compete with Rivian. The plant is scheduled to open in late 2026.VW’s software program unit Cariad has been struggling for years. Analysts say components of its legacy system come from suppliers, which makes integrating all of the completely different items sophisticated.The issues on the software program unit delayed work on vital new automobile fashions Porsche e-Macan and Audi Q6 e-tron.Volkswagen has launched a brand new software program structure however vehicles made utilizing that expertise will solely hit the market in 2028. The corporate’s new CEO, Oliver Blume, final yr appointed Bentley’s manufacturing chief Peter Bosch to steer Cariad.Nonetheless, VW stated Cariad will play a central function in scaling up software program that’s used throughout the manufacturers.(Reporting by Abhirup Roy in San Francisco and Ben Klayman in Detroit; Extra reporting by Noel Randewich in Oakland, California, Christina Amann in Berlin, Harshita Varghese in Bengaluru Writing by Sayantani GhoshEditing by Rod Nickel, Matthew Lewis and Leslie Adler)