Tesla Rival Scores $5 Billion Investment From Volkswagen Rivian and VW plan to fine-tune a "next-generation, software-defined vehicle."

Tesla rival Rivian saw its shares skyrocket on Wednesday thanks to a massive investment from Volkswagen.

The company announced on Tuesday that it would be investing $5 billion into Rivian to form a partnership to create "next-generation software-defined vehicle (SDV) platforms to be used in both companies' future electric vehicles."

Related: Rivian Announces R2, R3 Midsize EVs at a Lower Price Point

The new funds will help develop software to lower vehicle costs and increase production scale. Rivian also plans to license the IP of its electric vehicle design to Volkswagen to implement the software seamlessly into the new vehicles.

"Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it's exciting that one of the world's largest and most respected automotive companies has recognized this," said RJ Scaringe, Founder and CEO of Rivian, in a company statement. "Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group's global reach, but this partnership also is expected to help secure our capital needs for substantial growth."

Per Reuters, Rivian shares jumped 50% immediately following the announcement.

Scaringe also told the outlet that the investment will help fund smaller R2 SUVs set to hit the market in 2026.

The investment comes while rival electric vehicle maker Tesla faces financial woes after a Q1 2024 that saw its adjusted profit drop 48% and quarterly revenue plummet 9%.

Rivian reported a total revenue of $1.2 million and 13,588 vehicles sold in Q1 2024.

However, gross profit decreased due to what the company cited as "increased vehicle production and deliveries, reductions in materials costs, and higher average selling price."

Rivian was up 21% in a 24-hour period Wednesday afternoon and over 7% year over year.