Ford And VW Deepen A Marriage Of Convenience With Electric, Autonomous Car Alliance

For Ford Motor Co. and Volkswagen AG, the investments announced today deepen the global competitors’ financial marriage of convenience as they seek ways to reduce the high costs developing and building electric and autonomous vehicles. By doing that, they hope to be able to create economies of scale that will allow them to build both types of vehicles, especially EV’s, in volumes that will bring their prices down enough to gain wider consumer acceptance.

“Our industry and the world are being upended by technology and innovation,” said Ford CEO Jim Hackett during a joint news conference in New York this morning. “There’s a deep societal need for smarter solutions, for our over stressed, I call it the tyranny of transportation system.”

To that end, Volkswagen said it would join Ford in financially supporting autonomous platform company Argo AI, by investing $2.6 billion in the startup and will buy shares in the company from Ford for $500 million over three years. Both automakers will be majority owners of Argo, boosting its valuation to more than $7 billion.

The automakers also announced Ford will use Volkswagen’s electric vehicle architecture and Modular Electric Toolkit known as MEB, to build at least one high-volume electric vehicle for sale in Europe starting in 2023 including one based on a popular Ford sports car.

“Over the next five years Ford will introduce four new nameplates for the European market including a new fully electric Mustang inspired utility vehicle,” said Hackett.

As for autonomous vehicles, the companies plan to go all-in on using Argo’s self-driving system known as SDS.

“We can share significant R and D costs in the high triple-digital million dollar area and that’s for Volkswagen alone,” said Volkswagen CEO Herbert Diess during the Friday news conference. “Volkswagen will make use of the SDS platform by commercializing it in a vehicle in the early 2020’s. Together will make the Argo AI platform a global industry standard.”

Argo AI CEO Bryan Selesky said the system is being tested on the streets of Pittsburgh, Miami, Detroit, Palo Alto, Calif., and Washington D.C. with the goal of testing in Europe next year. The company’s aim is for autonomous vehicles to emulate, as much as possible, human operation using what Salesky termed “naturalistic” driving.

“Ford and VW’s alliances collaborating on autonomous vehicles through Argo AI and electric vehicles makes sense,” said Michelle Krebs, executive analyst at Autotrader. “The financial investment into these technologies is immense, with no immediate payback on the horizon, and the engineering talent to develop these technologies is scarce and in high demand. Combining forces not only means sharing resources but ultimately achieving scale and global reach that will advance the technologies faster.”

In April Ford announced it was investing $500 million in Plymouth, Mich.-based electric vehicle startup Rivian, with the intention of basing battery electric vehicles on the company’s so-called skateboard platform. But those vehicles would not be for sale in Europe.

Look for more of these financial marriages of convenience in the auto industry. As Ford’s Jim Hackett put it on Friday,” You’ve got to think of these mutations as a way to win.”

Source: Forbes.com

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