Shares of Rivian, headquartered in Irving, Calif., rose more than 40% in premarket trading on Wednesday.

Volkswagen has announced that it intends to work with Rivian to create a "next-generation software-configured vehicle (SDV) architecture" that will be used in both companies' future electric vehicles. The joint venture will use Rivian's "zonal hardware design" and platform as the basis for future vehicles, as well as Rivian's expertise in automotive electrical architecture. Rivian will license its intellectual property rights to the joint venture.

In return, Volkswagen will invest an initial $1 billion in Rivian through "unsecured convertible bonds that will be converted into Rivian common stock," with an additional investment of up to $4 billion through 2026, for a total of $5 billion.