Ford Motor will develop battery-powered cars based on Volkswagen Group's MEB electric platform in Germany, and VW will invest $2.6 billion in Ford's Argo AI self-driving unit.

The moves are part of an expanded alliance between the two automakers that VW CEO Herbert Diess and Ford CEO Jim Hackett announced on Friday in New York.

Under the terms announced Friday:

Ford will use VW's modular electric toolkit, known as MEB, to design a new battery-electric vehicle for its European operations. It will be designed and developed at Ford's development center in Merkenich, near Cologne, Germany.

Volkswagen will supply MEB parts and components for the EV. It estimates it could realize up to $20 billion in revenue by sharing its MEB architecture with Ford in Europe.

Ford said it expects to deliver over 600,000 MEB-based vehicles in Europe over a six-year period starting in 2023.

A second EV for European customers is "under discussion," Ford said.

Ford Automotive President Joe Hinrichs said it would take four years to design Ford's electric car around the MEB architecture, and retool a Ford of Europe plant to build the vehicle.

Analysts at Citi said Ford's licensing of Volkswagen's MEB platform was a "transformational" step for both companies. "It likely provides VW with an unassailable scale advantage," Citi analyst Angus Tweedie said in a note published on July 10.