Volkswagen AG has agreed to invest about $ 2.6 billion in Argo AI, Ford Motor Co.'s motor vehicle partner, in a contract pricing start-up at $ 7 billion, according to sources close to the case.
Ford is the majority shareholder of Argo, based in Pittsburgh, since the beginning of 2017, when it agreed to invest $ 1 billion.
Under the agreement with Volkswagen, which will be announced Friday, Argo will develop an autonomous driving technology for VW and eventually provide systems for commercial use, while continuing its development work with Ford, said the population .
The $ 2.6 billion investment in Argo includes a $ 1 billion capital funding as well as the value of VW's 200-person standalone driving division in Munich, which companies have placed to $ 1.6 billion.
This group, called Autonomous Intelligent Driving, is led by VW's luxury Audi car unit and will form the foundation for Argo's presence in Europe, officials said.
Leading automakers have stepped up their efforts to develop driverless and electric cars and build commercial models around them.
The San Francisco-based General Motors Co.'s Cruise subsidiary is currently developing an autonomous driving system with Honda Motor Co., which has agreed to invest $ 2.75 billion in Cruise.
The startup has attracted more than $ 6 billion in outside investment and was estimated at $ 19 billion after its last round of financing in May, GM said.
VW and Ford have scheduled a press conference on Friday morning to provide details on future cooperation between German and American automakers. Earlier this year, companies agreed to jointly develop and build commercial vans and trucks. They are supposed to define plans to work together on the development of electric vehicles.
Last year, Ford and VW began talks that culminated in the January agreement on collaboration in vans and trucks for markets around the world. The idea of working together on electrical and autonomous technology has resulted from these earlier discussions. Both parties stated that they were not interested in cross-ownership agreements between them.
The race to develop autonomous cars has spawned numerous partnerships between automakers, automakers and technology companies, with the goal of solving what GM GM's CEO, Mary Barra, has described as "one of the biggest technical challenges of our time ".
German luxury car rivals Daimler AG and BMW AG are working together on the development of driverless cars and smartphone-based mobility services.
The Waymo unit of Alphabet Inc., considered by many analysts as the most advanced in terms of technical development, collaborates with several major car manufacturers, including Fiat Chrysler Automobiles NV, the French Renault SA and its partner in the field alliance, the Japanese Nissan Motor Co.
AlixPartners LLP, a consulting firm, anticipates that approximately $ 45 billion will be spent on developing autonomous vehicles globally by 2025.
Write to Mike Colias at Mike.Colias@wsj.com