Volkswagen AG has entered into an agreement to invest around $ 2.6 billion in Ford Motor Co.'s autonomous car partner, Argo AI, in a deal worth $ 7 billion, according to people familiar with the case.
Ford has been the majority shareholder in Pittsburgh-based Argo since early 2017, when it agreed to invest $ 1 billion.
According to the deal with Volkswagen, announced on Friday, Argo wanted to develop autonomous driving technology for VW and ultimately deliver systems for commercial use, while continuing their development work with Ford, the people said.
The $ 2.6 billion investment in the Argo includes $ 1 billion in capital financing, as well as the value of VW's 200-person autonomous driving department in Munich, which the companies placed at $ 1
This group, called Autonomous Intelligent Driving, is run by VW's Audi luxury car unit and will form the basis of Argo's presence in Europe, the people said.
Large car manufacturers have been consolidating efforts as they drive to develop driverless and electric cars and build business models around them.
General Motors Co.'s San Francisco-based Cruise subsidiary develops an autonomous driving system with Honda Motor Co., which has agreed to invest $ 2.75 billion in cruises.
The startup has attracted more than $ 6 billion in foreign investment and was valued at $ 19 billion after the last funding round in May. GM has said.
VW and Ford scheduled a press conference on Friday morning to provide details on further cooperation between German and US automakers. Earlier this year, the companies agreed to jointly develop and build commercial vans and trucks. They are expected to outline plans to work together to develop electric vehicles.
Ford and VW began talks last year that led to the January agreement to work on vans and trucks to markets worldwide. The idea of working with electrical and self-propelled technology grew from the previous conversations. Both sides have said that they are not interested in any cross-ownership with each other.
The race to develop self-driving cars has created many partnerships between car companies, car dealers and technology companies – all with the goal of resolving what GM's CEO Mary Barra has called "one of the greatest technical challenges of our time."
German luxury wagons Daimler AG and BMW AG work together to develop driverless cars and smartphone-based mobility services.  The Waymo unit Alphabet Inc., which many analysts consider to be the most advanced in technical development, is working on several major automakers, including Fiat Chrysler Automobiles NV, France's Renault SA and alliance partner, Japan's Nissan Motor Co.  The consulting firm AlixPartners LLP estimates that around $ 45 billion will be spent on developing autonomous vehicles globally by 2025.
Write to Mike Colias at Mike.Colias@wsj.com