Embattled German car manufacturer Volkswagen has launched a joint venture with US electric vehicle manufacturer Rivian.

The venture is valued $5.8 billion (€5.46 billion) of total investment.

The partnership is expected to build on Rivian's advanced software and electric vehicle technology, with the first models expected started in 2027, VW Group CEO Oliver Blume said at the launch of the joint venture on Tuesday in Palo Alto, California.

Blume said the 2027 rollout would begin with Volkswagen and would be followed by Audi, Scout, Porsche, and other brands.

In June, the companies announced the intention to embark on a joint venture with a view to creating "next generation software-defined (SDV) platforms” which would be used in both companies' electric vehicles.

The new joint venture is set to begin operations on Wednesday, and will be based in Palo Alto, with other locations planned for Europe and North America.

Challenges facing both companies

The deal offers an important financial shot in the arm for Rivian, with the company operating at a loss due to a decreased US appetite for electric vehicles.

Rivian was founded in 2009 and specialize in large SUVs and pickups which are popular choices in the US market.

In the last quarter, Rivian reported a $392 million loss against $874 million in revenue, despite delivering around 10,000 vehicles.

VW in the same period, managed nearly 2.2 million vehicle deliveries generating €78.5 billion ($83.3 billion) in revenue and securing a €1.58 billion profit after taxes, representing a net profit loss, year-on-year.

VW is in the midst of a sales and cost crisis and says it needs to close factories in Germany and layoff thousands of staff and finds itself among the European carmakers facing increased competition from cheaper Chinese electric cars.

VW has also has been plagued by problems with its own software development company CARIAD, forcing its subsidiaries Audi and Porsche to delay the introduction of new EVs by as much as two years, according to the German business daily Handelsblatt.

kb/wmr (dpa, AFP)