Volkswagen AG today announced that it is expanding its partnership with Ford Motor Corp.to include electric and autonomous vehicles. "Scaling our MEB drives down development costs for zero-emissions vehicles, allowing for a broader and faster global adoption of electric vehicles".
Volkswagen will contribute its Autonomous Intelligent Driving (AID) company to the venture.
Ford previously invested $1 billion in Pittsburgh-based Argo AI, which is expected to expand from 200 to 700 employees. VW also will buy $500 million worth of Argo stock over the next three years.
Unprecedented shifts facing the auto industry are forcing players to consider new partnerships and potential consolidation.
Akshay Anand, executive analyst at Kelley Blue Book, said in an emailed statement that partnerships such as this one "will continue to ramp up in coming years, crossing boundaries most would not have envisioned even 10 years ago".
Credit Suisse said an an expanded alliance between the two companies could combine VW's strength in EVs with Ford's in autonomous vehicles, allowing both to "address these challenges in a more capital-efficient manner".
Teaming up with its US peer is one of the key initiatives of VW Chief Executive Officer Herbert Diess to overhaul the German industrial giant.
VW and Ford said their alliance would let them roll out self-driving technology in more markets than other companies.
Automotive manufacturers are increasingly partnering to advance work on self-driving cars, given the high cost of developing the technology and long runway to profitability.
The US automaker will use VW's electric vehicle architecture - the "Modular Electric Toolkit" - to deliver more than 600,000 vehicles over six years starting in 2023 with a new Ford model for European customers, while VW expects to produce 15 million cars over the next decade.
The joint announcement focused more on the autonomous side of things but the two companies are not ignoring the electric vehicle side of the equation.
As Diess said, "In such a competitive environment, it just makes sense to share investments, pool innovation capabilities, and create scale effects that are clearly defined".
In February, VW and Ford discussed an approximate valuation of US$4 billion, a person familiar with the deliberations said.