• Volkswagen on Friday announced a $2.6 billion total investment in ArgoAI , a self-driving-vehicle startup that spun out of Carnegie Mellon University in 2016 and that had earlier attracted $1 billion in funding from Ford .
  • VW's investment is $1 billion in cash, with the additional contribution of its $1.6-billion, Munich-based Autonomous Intelligent Driving division.
  • ArgoAI would remain an independent company post-deal, which would allow it to seek additional investment from other partners.
  • Also on Friday, VW and Ford revealed additional details of their ongoing alliance, which commenced earlier this year. Ford will use a VW electric-vehicle platform to launch a new European EV by 2023.
  • Visit Business Insider's homepage for more stories.

The race to fund promising self-driving-car startups is intensifying.

On Friday, Volkswagen announced that it would invest $2.6 billion in the autonomous-driving tech startup ArgoAI . The stake consists of $1 billion in cash plus the contribution of the VW Group's $1.6-billion Autonomous Intelligent Driving (AID) division, headquartered in Munich, Germany.

The deal would value ArgoAI at more than $7 billion and transform AID into the startup's European headquarters.

"Our agreement with Volkswagen positions us as a technology platform company, expands the potential geography for deployment and will further fuel our product development," ArgoAI Bryan Salesky said in a blog post published Friday. "In fact, we're the first self-driving company with definitive deployment plans in both the United States and Europe."

He added: "We are excited to welcome the AID employees to Argo AI....With this move, our company will expand by 200 employees to reach a total of over 700."

Read more: The CEO of Argo AI, a self-driving startup backed by Ford, reveals the one thing that is absolutely necessary for an autonomous-driving company to survive

ArgoAI formed in 2016 and, according to Salesky, planned to join with a major automaker from the beginning. It's now joined with two. And the investments from VW and from Ford, which committed $1 billion in 2017 , don't exclude other companies from funding ArgoAI's growing platform.

Ford was ahead of the curve. "Bill Ford saw a lot of this before others did," Salesky said of Ford's chairman, a longtime advocate of new-mobility ideas, in a 2018 interview with Business Insider . "He knew it would be a game-changer."

Ford and VW will hold equal stakes in ArgoAI as a result of the deal.

Since early 2019, Ford and VW have been establishing a collaborative alliance (but not a formal tie-up, like the Renault-Nissan-Mitsubishi alliance), so there's clear logic in VW CEO Herbert Diess following Ford CEO Jim Hackett's lead in making a bet on ArgoAI.

ArgoAI now has investment from the world's biggest car maker

"It's very capital-intensive," Salesky said of bringing autonomous mobility to market. "It's not just the self-driving-car tech. We're talking about funding and deploying tens of thousands of vehicles. Going it alone without a car maker would be too hard. Ford has scale and a strong brand."

And so does the VW Group, the world's biggest automaker.

Read more: An early Lyft backer has invested in self-driving cars, artificial intelligence, robotic farm equipment, and more. Here's why he won't touch scooter startups.

VW's ArgoAI investment is a pure technology play, as the Pittsburgh startup now operating in the Detroit area, Silicon Valley, Washington, DC, New Jersey, and Miami spun out of Carnegie Mellon University in 2016 and is now focused on developing its robotics-based tech rather than bringing it to market. That task falls to partners who elect to use it in their vehicles.

Ford's stated goal is to launch a fully self-driving vehicle by 2021. The No. 2 US car maker has been perceived as lagging behind Alphabet's Waymo and General Motors-owned Cruise, the latter of which has scored investments from SoftBank's Vision Fund and Honda, as well as institutional investors, taking its valuation to $19 billion .

Prior to Friday's ArgoAI-VW announcement, the startup's value had been pegged at around $4 billion , but the VW investment indicated that number was too low and further indicates that a peer-group of well-funded autonomous companies has emerged to compete with each other as the incipient market takes shape.

Cruise intends to launch an autonomous ride-hailing service this year, and Waymo brought its service, dubbed "Waymo One," to Arizona late in 2018. Tesla CEO Elon Musk has said that his company could produce a robo-taxi fleet by 2020.

Also on Friday, Ford and VW announced that they would expand their global alliance. Ford will use a VW electric- vehicle platform to launch a European EV by 2023 and continue their collaboration on delivery vans and pickup trucks.

NOW WATCH: Watch Ford's delivery robot that walks on two legs like a human

See Also:

FOLLOW US: On Facebook for more car and transportation content!