The new agreement builds on an earlier announcement in which the German automaker said it would invest up to $5 billion in Rivian, a maker of electric vehicles. The new venture brings them closer.
Ford is struggling to make money on battery-powered models while General Motors, which started more slowly, says it is getting close to that goal.
The automaker said it would invest less in battery-powered cars and scrap a planned electric three-row sport utility vehicle.
The General Motors sports car, which enjoyed strong sales after a big design change, now has a hybrid version and may get a fully electric model that may turn off some gas-loving customers.
VW and Rivian, a maker of electric trucks that has struggled to increase sales and break even, will work together on software and other technologies.
More efficient manufacturing, falling battery costs and intense competition are lowering sticker prices for battery-powered models to within striking distance of gasoline cars.
Automakers and dealers are starting to offer discounts, low-interest loans and other incentives to lure buyers as the supply of cars grows.
Southern political leaders say a win for the United Automobile Workers would threaten their economies. Activists want to strike a blow against a system they say exploits the poor.
Automakers in the United States and their supporters welcomed President Biden’s tariffs, saying they would protect domestic manufacturing and jobs from cheap Chinese vehicles.
General Motors has struggled with electric vehicles and in foreign markets but it is selling lots of combustion engine cars and trucks in North America.