Volkswagen's XETR:VOW software unit Cariad and supplier Bosch have ended their joint autonomous driving project, the companies said on Wednesday.
Both parties will retain access to the intellectual property and data developed under the partnership and may continue to develop the technology independently, they said.
Volkswagen said the technological foundation created with Bosch would strengthen the company over the long term and that it would provide an update on next steps in due course.
The partnership had focused on so-called Level 2 driver-assistance systems, which still require motorists to remain engaged and monitor the road.
Volkswagen said the collaboration would not extend to Level 3 technologies, under which the vehicle assumes responsibility for monitoring the driving environment under certain conditions.
Bosch Mobility has already secured contracts for its software stack worldwide and all projects remain on track for planned production launches, Chief Technology Officer Christoph Hartung said.
Germany's Bild newspaper first reported the move, which comes as Volkswagen steps up cost-cutting efforts as it grapples with tariffs, weak demand and intensifying competition from Chinese rivals.
Cariad, which has struggled with delays and losses since its creation, and Bosch launched the partnership in 2022 to develop software for driver-assistance and autonomous-driving systems across Volkswagen brands.
Sources told Reuters last week that planned job cuts at Volkswagen could double to 100,000 and that four German plants could face closure under a management proposal expected to meet strong resistance from labour representatives.