Ford and Volkswagen are to extend their alliance with a multi-billion pound tie-up on driverless and electric vehicles.

Details of the technology-sharing deal between the car giants were announced at a press conference in New York.

Under the cost-saving move, VW will invest $2.6bn (£2bn) in Argo AI, the autonomous vehicle tech firm, which is mostly owned by Ford and is now valued at $7bn (£5.6bn).

The agreement will allow both carmakers to independently integrate the company’s self driving system into their own vehicles.

Ford will also become the first competitor to be able to use VW’s electric vehicle technology in at least one of its product lines from 2023.

The German and US manufacturers had already unveiled plans to jointly develop commercial vans and pickups starting in 2022.

The firms say the alliance, which does not involve cross-ownership, will generate annual efficiencies for both companies.

Ford president and chief executive Jim Hackett said: While Ford and Volkswagen remain independent and fiercely competitive in the marketplace, teaming up and working with Argo AI on this important technology allows us to deliver unmatched capability, scale and geographic reach.

Unlocking the synergies across a range of areas allows us to showcase the power of our global alliance in this era of smart vehicles for a smart world.

VW boss Dr Herbert Diess said: Our global alliance is beginning to demonstrate even greater promise, and we are continuing to look at other areas on which we might collaborate.

He pointed out sharing his firm’s electric technology would help drive down development costs for zero-emissions vehicles and allow for their wider and faster global adoption.

VW as been focused on this area in the wake of the so-called dieselgate scandal that has cost Europe’s largest carmaker in excess of $30bn (£23.5bn).

Dr Diess said of the tie-up: This improves the positions of both companies through greater capital efficiency, further growth and improved competitiveness.

Technology firms and traditional carmakers are in a race to take the lead on autonomous technology – and several partnerships have already been completed to spread the cost.

They include Honda’s tie-up with General Motors and Google becoming bedfellows with Toyota.

The race is taking place against a backdrop of several pressures including the crackdown on polluting diesel, the US/China trade war and the wider slowdown in the world economy – all affecting sales.

In the UK, where Ford employs 13,000 people and has two engine plants, sales and future trade have also taken a knock from Brexit uncertainty.

(c) Sky News 2019: VW and Ford join forces on driverless and electric vehicles