Volkswagen Group and Innoviz last week signed a major deal concerning the supply of lidar systems and related software for use in future automated driving systems.

Innoviz is an Israeli firm that specializes in lidar sensors and the software that identifies objects using the incoming lidar information, for instance other vehicles or road markings.

The deal is specifically between Innoviz and VW Group's Cariad software development unit. Cariad has been tasked with developing software for the full VW Group portfolio of brands, including a self-driving system for private use. VW Group is also working with America's Argo AI to develop a self-driving system for commercial use, such as a taxi fleet.

Innoviz expects to supply enough units for between 5 million and 8 million vehicles over a period of about eight years starting around the middle of the decade. That could be as much as $4 billion in sales, according to CNBC.

"We are thrilled to work with the Cariad team and be a supplier of lidar sensors and perception software to support safe mobility for vehicles launching from the middle of the decade," Omer Keilaf, Innoviz's CEO and co-founder, said in a statement.

VW Group has worked with Intel's Mobileye on sensor systems for driver-assist features, though these have relied on cameras rather than lidar. The two also announced in 2018 plans to have a self-driving taxi service up and running in Israeli in 2022, though an update on those plans hasn't been announced.

VW Group is expected to have its first vehicles with true hands-off, eyes-off driving capability on sale in the second half of the decade, with the system likely to be initially available for highway use. The automaker has also announced it will have a self-driving taxi service using Argo AI's self-driving system in operation starting in 2025, with the first locations to be the German cities of Hamburg and Munich. VW and Argo AI will also start testing self-driving taxis in the U.S. in 2023.