The company says it has signed an engineering services deal with the German automaker for the development of fuel cells to be used in demonstration cars.
"The announcement of this research agreement with Volkswagen Group, a recognized global leader, is a major step for Ballard both strategically and financially," said Ballard president and chief executive John Sheridan.
"Ballard's focus with Volkswagen in this new automotive fuel cell research program will parallel our continuing work in commercial fuel cell markets for backup power and material handling — enhancing product durability and performance while radically reducing product costs."
The four-year contract, which includes an option for a two-year extension, is worth $60 million to $100 million.
The work will include the design and manufacture of a fuel cell for use in Volkswagen HyMotion demonstration cars.
Ballard engineers will lead key areas of fuel cell design along with testing and integration work.
"This research agreement with Ballard demonstrates our commitment to the development of clean energy fuel cell transportation alternatives," said Juergen Leohold, head of group research at Volkswagen AG.
"I anticipate accelerating our automotive fuel cell program as a result of this collaborative effort, which will bring together additional fuel cell skills and expertise in both organizations."
Ballard made a name for itself as a maker of fuel-cell powered buses and rode high hopes for its automotive fuel cell business.
However, adoption of the technology was slow and Ballard sold its automotive fuel cell business to Daimler AG and Ford Motor Co. in 2008.
The company instead shifted its focus on its core commercial markets including forklifts, back up power and co-generation though it continued to provide services to the automakers.
Shares in Ballard closed up 48 cents or 55 per cent at $1.35 on the Toronto Stock Exchange.