Volkswagen AG and Ford Motor Co will cooperate on electric and self-driving car technology, sharing costs on a global scale to take a major step forward in the industry’s disruptive transformation.
VW will invest $2.6 billion in Ford’s autonomous-car partner Argo AI in a deal that values the operation at more than $7 billion, the two manufacturers said in a joint statement in New York, confirming a figure first reported by Bloomberg. This includes $1 billion in funding and VW contributing its Audi $1.6 billion Autonomous Intelligent Driving unit.
“While Ford and Volkswagen remain independent and fiercely competitive in the marketplace, teaming up and working with Argo AI on this important technology allows us to deliver unmatched capability, scale and geographic reach,” Ford Chief Executive Officer Jim Hackett said.
Unprecedented shifts facing the auto industry are forcing players to consider new partnerships and potential consolidation. VW, the world’s top automaker, offers the industry’s most ambitious roll-out of electric models, while Ford, also in the top 10, is developing advanced self-driving technology with Argo.
For VW, the Argo investment offers an opportunity to potentially catch up with Alphabet Inc’s Waymo, and General Motors Co’s Cruise unit. Road tests and accumulating huge amounts of data are critical for the further development of self-driving cars, and few apart from Waymo are equipped to do it alone.
“It took a while to get this deal done, but it’s because we actually sorted out a lot of the hard problems,” Bryan Salesky, Argo AI’s co-founder and CEO, said in an interview.
“We have a clear line of sight to production, vehicle supply and we have clear line of sight to where we want to go to market and how.”
Besides sharing costs for the development of self-driving cars, Ford will use VW’s electric-car underpinnings that form to backbone of the most aggressive rollout of electric cars in the industry with Volkswagen spending some 30 billion euros ($34 billion). Adding more vehicles to production lines would help gain scale and save costs, and offer Ford a platform to better comply with tougher rules on carbon-dioxide emissions in Europe.
Ford will build at least one mass-market battery car in Europe starting in 2023 and deliver more than 600,000 European vehicles based on VW’s platform, dubbed MEB, over six years. A second electric model for Europe is under discussion.
Teaming up with its US peer is one of the key initiatives of VW Chief Executive Officer Herbert Diess to overhaul the German industrial giant. Both sides reiterated on Friday the tie-up does not include entering equity ties between Ford and VW.
For Ford, a deal with VW fits with CEO Jim Hackett’s $11 billion overhaul of the company, which includes exiting the slow-selling sedan market in the US, shifting to focus on commercial vehicles in Europe and investing in electric-truck startup Rivian Automotive Inc. Geographically, the companies complement each other, with Ford strong in the US and VW a leader in Europe and China.
“Our global alliance is beginning to demonstrate even greater promise , and we are continuing to look at other areas on which we might collaborate,” VW CEO Diess said.