Rivian's (RIVN, Financial) shares soared 16% on Wednesday after the company announced plans to form a deeper partnership with Volkswagen (VWAGY, Financial). Volkswagen intends to raise its stake in the joint venture with Rivan and take its total investment up to $5.8 billion from $5 billion.

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"We are happy to see our technology integrated into vehicles outside our brand and are excited about the future," Rivan's CEO said in a statement.

The initial part of this EV venture was announced in June 2024. It uses Rivian's original zonal architecture and software layers, both core elements for the upcoming midsize R2 SUV, due in early 2026.

In the next phase, Rivian's technology will be integrated into Volkswagen vehicles, and this may potentially be seen at VW as early as a second-generation vehicle by 2027. The primary market for the new joint venture will be North America, with tentative advancement to the European market, all targeting midsize and subcompact EV buyers.

The new funding is also extended to VW, now totaling $1.3 billion for intellectual property rights and a 50 % JV equity stake. Further, $3.5 billion will come through equity, convertible notes, and debt at different points in development based on the achievement of developmental tasks. As noted by a Rivian official communicating to this publication, this partnership does not include battery technology or EV drive units.

As Wedbush analyst Dan Ives pointed out, the deal was important and was the next key step for Rivian to fuel growth and obtain the needed capital to expand the company's R2 platform plant in Georgia. The tie-up may be seen as a valuable addition to extending Rivian's production plans, which are already under the pressure of increasing market competition.

This article first appeared on GuruFocus.