German automaker VW invested up to $5 billion in Tesla rival Rivian

German car giant Volkswagen (VW) said it will invest up to $5 billion (£3.94 billion) in Tesla rival Rivian.

The deal creates a joint venture that will allow VW and the US-based electric vehicle (EV) maker to share technology.

Rivian shares jumped nearly 50% following the announcement.

This cooperation comes amid increasingly fierce competition between electric vehicle manufacturers and Western countries moving to impose tariffs on imports from China.

Under the deal, VW said it will initially invest $1 billion in the electric truck and SUV maker, and another $4 billion will be invested in the company by 2026.

Founded in 2009, Rivian has yet to post quarterly profits. In the first three months of 2024, the company lost $1.5 billion.

VW, like other auto giants, has come under pressure from rivals such as Tesla and China’s BYD as they try to transition away from fossil fuel-powered vehicles.

Meanwhile, some electric vehicle startups have struggled to make headway in the highly competitive market and as higher interest rates hurt demand for tickets in bulk.

The partnership will give VW immediate access to Rivian’s software, allowing the German automaker to use it on its cars.

Auto giants like VW are also facing increasing competition from Chinese electric vehicle makers, which are expanding globally.

In the first day of this month, The European Union (EU) warns that it will increase taxes on electric vehicles imported from China by up to 38%..

Officials from China and the EU organized negotiations before the July 4 deadline.

A months-long investigation by the European Commission found that Chinese electric vehicle companies were “unfairly subsidized”.

In response, China said the tariffs violated international trade rules and described the investigation as “protectionism”.

This plan was launched just a month after the US said it would increase import tariffs on Chinese electric vehicles from 25% to 100%.

This week, Canada said it was considering a similar move to align with allies.