(Reuters) -Volkswagen Group raised its investment in Rivian by 16% to $5.8 billion and the two companies said on Tuesday they were launching their previously announced joint venture to develop electric vehicle architecture and software.

The companies said in June that VW would invest $5 billion in Rivian. Shares in the U.S. EV maker rose nearly 4% in extended trading.

The joint venture aims to integrate advanced electrical infrastructure and Rivian’s software technology for future EVs of both companies, across all relevant vehicle segments, including subcompact cars, the firms said.

Volkswagen plans to invest the $5.8 billion in Rivian and the joint venture by 2027, including an initial $1 billion convertible note.

The Audi-parent will also invest $1.3 billion for intellectual property licenses and an equity stake and up to $3.5 billion in future equity, notes and debt, all tied to specific milestones.

Rivian’s Chief Software Officer Wassym Bensaid and VW Group’s Chief Technical Engineer Carsten Helbing will lead the joint venture named Rivian and VW Group Technology LLC.

Developers and engineers in the JV will be based initially in Palo Alto, California with three additional sites under development.

The joint venture will use Rivian’s existing tech to launch Rivian’s R2 in the first half of 2026 and potentially debut Volkswagen Group models as early as 2027.

(Reporting by Akash Sriram in Bengaluru; Editing by Mohammed Safi Shamsi)

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