Volkswagen AG has agreed to invest around $2.6 billion in Ford Motor Co.’s autonomous-vehicle partner, Argo AI, in a deal that values the startup at $7 billion, according to people familiar with the matter.

Ford has been the majority shareholder of Pittsburgh-based Argo since early 2017, when it agreed to invest $1 billion.

Under the agreement with Volkswagen, to be announced today (July 11), Argo would develop autonomous-driving technology for VW and eventually supply systems for commercial use, while continuing its development work with Ford.

The $2.6 billion investment in Argo includes $1 billion in capital funding as well as the value of VW’s 200-person autonomous-driving division in Munich, which the companies placed at $1.6 billion.

That group, called Autonomous Intelligent Driving, is run by VW’s Audi luxury-car unit and will form the foundation of Argo’s presence in Europe.

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