BERLIN-Volkswagen AG has announced that it will work with Microsoft Corp. to work together to develop a new digital services platform in their cars, the latest initiative of a major automaker to translate the technology into the hope of generating lucrative revenue over the next few years.

The deal announced on Friday is the biggest step for the German manufacturer to connect its vehicles to the Internet. This paves the way for a wide range of embedded services, including video streaming, restaurant booking and finding a repair shop.

The move by Volkswagen is also a big win for Microsoft, which has evolved from an outdated software publisher to a driving force in cloud computing, where it remains a distant number two behind Amazon.com Inc. The Volkswagen Service is building the Microsoft Azure cloud platform.

Volkswagen has not provided any financial information about the contract with Microsoft, which is subject to a five-year renewal option.

Under the agreement, Volkswagen will set up a development center near Microsoft’s headquarters in Redmond, Washington. Volkswagen will invest in the center a minimum sum of three million euros in three numbers.

Microsoft will provide engineers and Volkswagen will bring the Germans to this new center. The number of employees will rise to about 300.

From 2020, Volkswagen plans to add one million new vehicles per year to its cloud, offering a range of services. The launch begins with the introduction of the new generation of Volkswagen electric cars, starting with the compact car with ID Neo battery, and will be extended to other vehicles as they are introduced.

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