Ford Motor and Volkswagen said Friday they would team up to develop self-driving cars and share electric-car components, significantly broadening an existing alliance and illustrating how automakers are putting aside rivalries to manage the astronomical cost of new technologies.
The agreement calls for Volkswagen to purchase a stake in a Ford-backed start-up that is developing self-driving technologies, and for Ford to use electric-car components developed by Volkswagen.
As auto sales slump around the world, hard-pressed carmakers have little choice but to join forces to fend off Silicon Valley challengers and avoid obsolescence amid a fundamental change in the nature of transportation.
But Volkswagen and Ford, which already cooperate on commercial vehicles and pickups, must show they can avoid the power struggles among managers and engineers that have doomed many other alliances.
Volkswagen, which sold more cars than any other company last year, is known for its insular hierarchical culture and has little experience cooperating with rivals. A previous alliance with Suzuki ended in 2015 with bitter feelings on both sides.
“Autonomous driving is a very, very expensive technology,” Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in Germany, said in an email. “One has to invest today in order to make the first sales in 2030, maybe. Therefore it makes a lot of sense for Ford and VW to work together.”
Mr. Dudenhöffer questioned whether Herbert Diess, the chief executive of Volkswagen, and Jim Hackett, the chief executive of Ford, can make the compromises necessary for the alliance to succeed. Both are “alpha wolves,” Mr. Dudenhöffer said.
It may help that Ford and Volkswagen are dividing the labor to take advantage of each company’s strength. Ford is ahead of Volkswagen in autonomous driving, while Volkswagen is more advanced than Ford in electric cars.
Volkswagen has agreed to invest $2.6 billion in cash and other resources in Argo AI, a Ford-backed start-up that is working on sets of sensors, software and other technologies to enable cars to drive themselves. Volkswagen will fold its autonomous vehicle project, which is based in Munich, into Argo. The agreement values Argo at $7 billion.
In 2021 Ford aims to put Argo’s systems in driverless taxis and delivery vehicles in the United States. Volkswagen plans to use self-driving technology in its Moia ride-sharing service, a fleet of six-seat, battery-powered vans already operating with human drivers in Hamburg and expected to be introduced in other European cities.
In a separate agreement, Ford plans to build electric cars based on motors, batteries and other standardized components that Volkswagen has developed and is using in a new model called the ID.3, due next year. Volkswagen has said the car will sell for less than 30,000 euros in Europe, or $34,000, making battery-powered transportation more accessible to middle-income buyers.
The need for companies to share the cost and risk of developing autonomous vehicles has become more urgent because car sales are slowing in all of the major markets, including China, the United States and Europe.
“The financial investment is immense, and yet we don’t know when they will be in the marketplace or how they will make money,” said Michelle Krebs, a senior analyst at Auto Trader. “It’s not just the money. The talent pool for people developing these vehicles is small.”
Profits are falling across the industry. Daimler said Friday that it would report a pretax loss for the second quarter of 1.6 billion euros. A year earlier Daimler reported a profit of 2.6 billion euros.
The company, based in Stuttgart, Germany, said the loss was caused by the need to set aside 1.6 billion euros related to ongoing investigations in the United States and other countries into whether Mercedes diesel cars contained illegal emissions cheating software. In addition, Daimler will set aside 1 billion euros to cover the cost of recalling cars with defective airbags made by Takata, a Japanese firm.
Other big carmakers have already formed partnerships to develop cars that can drive themselves. Cruise, General Motor’s autonomous division, has gotten billions of dollars in financing from Honda and others. G.M. has put Cruise’s valuation at $19 billion.
Toyota has partnered in autonomous vehicles with Uber, the ride-hailing service. Luxury carmakers Mercedes-Benz and BMW have pooled their self-driving efforts. Several large automotive suppliers are also working on autonomous technology.
They face competition from well-financed Silicon Valley companies. Waymo, which is owned by Google parent Alphabet, has been working in the field for a decade and operates a test fleet of 600 self-driving taxis in Phoenix that it hopes to expand.
Estimates vary on how quickly cars will be able to operate without any human intervention, from a year or two to decades. For now, most of the self-driving test vehicles operate on public roads with one or even two safety drivers.
Founded in 2016, Argo has 500 employees and is operating test vehicles in Pittsburgh, where it is based, and Miami. Its chief executive, Bryan Salesky, formerly was part of the Google team working on self-driving cars. In 2017, Ford agreed to take an undisclosed stake in the company and invest $1 billion over five years. About 200 Volkswagen employees will join Argo.
Ford and Volkswagen previously agreed to cooperate in commercial vehicles for Europe and pickup trucks, and have said they were discussing cooperation in electric and autonomous vehicles.
For Ford and Argo, Volkswagen adds heft to the effort, said Mike Ramsey, a Gartner analyst. “Volkswagen is the world’s largest automaker by sales volume and has a huge global footprint,” he said. “The potential market for Argo technology is much bigger than with Ford alone.”
At the same time, Ford is scrambling to catch up in electric vehicles. The company hopes to introduce a slew of new electric models in the next few years. Using Volkswagen’s EV technology should speed the development effort. In April, Ford said it would invest $500 million in a start-up, Rivian, that is developing an electric pickup truck and sport-utility vehicle. Ford intends to use the underpinnings of Rivian’s vehicles to produce models of its own.