SAN FRANCISCO (Reuters) -German automaker Volkswagen Group will invest up to $5 billion in U.S. electric-vehicle maker Rivian as part of a new, equally controlled joint venture to share EV architecture and software, the companies said on Tuesday.

Shares of Rivian surged 30% in extended Nasdaq trade after the announcement, boosting the company’s stock market value by more than $3 billion.

The investment will provide Rivian – known for its flagship R1S SUVs and R1T pickups – the funding it needs to develop its less-expensive and smaller R2 SUVs that are set to roll out in 2026, CEO RJ Scaringe told Reuters.

Volkswagen will initially invest $1 billion in Rivian and a further $4 billion in investments later, the companies said.

The partnership will help Volkswagen accelerate its plans to develop software-defined vehicles (SDV), with Rivian licensing its existing intellectual property rights to the joint venture.

While EV startups have been grappling with a slowdown in demand amid high interest rates and dwindling cash, traditional automakers have struggled to build battery-powered vehicles and advanced software.

(Reporting by Abhirup Roy in San Francisco; Additional reporting by Noel Randewich; Editing by Rod Nickel)