American electric vehicle maker Rivian and Volkswagen Group on Tuesday announced plans for a $5 billion joint venture that includes creating industry-leading vehicle software technology to be used by both companies' future EVs.

Volkswagen is initially putting $1 billion into Rivian, with up to $4 billion in planned additional investment, the companies said in a statement.

The joint venture is expected to build on what the statement termed "Rivian's industry-leading software and electrical architecture to create best-in-class software-defined vehicle technology platform."

Volkswagen's Chattanooga assembly plant builds the ID.4 electric SUV.

The deal is expected to allow both companies to combine strengths and lower costs per vehicle by increasing scale and speeding up innovation globally, the statement said.

(READ MORE: With Rivian's pause, neighbors near factory site wonder what's to come)

Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade, according to the automakers.

In the short term, the initiative is expected to enable Volkswagen Group to utilize Rivian's existing electrical architecture and software platform.

Oliver Blume, CEO of Volkswagen Group, said its customers will benefit from the targeted partnership with Rivian to create a leading technology architecture.

"Through our cooperation, we will bring the best solutions to our vehicles faster and at lower cost. We are also acting in the best interest of our strong brands, which will inspire with their iconic products," he said in a statement. "The partnership fits seamlessly with our existing software strategy, our products and partnerships. We are strengthening our technology profile and our competitiveness."

RJ Scaringe, founder and CEO of Rivian, said the partnership is expected to bring its software and associated architecture to an even broader market through Volkswagen Group's global reach. It's also expected to help secure capital for substantial growth.

Rivian earlier this year put on hold plans for a $5 billion factory just east of Atlanta. Rivian has said it intends to honor its commitment to build the Georgia plant but announced a shift in production of its new lower priced EV to Illinois.

-- Compiled by Mike Pare

Workers are seen at the Rivian factory in Normal, Ill., on Jan. 13, 2021. (Lyndon French/The New York Times)