Ford Volkswagen deal

Ford Motor Company and Volkswagen have announced they are expanding their global alliance to include electric vehicles and self-driving technology.

They will collaborate with autonomous vehicle platform company Argo AI to introduce self-driving technology in the US and Europe in a deal valuing the start-up at $7 billion.

Argo AI’s focus is on delivering a self-driving system to be applied for ride sharing and goods delivery services in urban areas.

Volkswagen and Ford will integrate the technology into purpose-built vehicles, with both automakers saying they see potential for profitable growth by targeting new business areas tied to autonomous technology.

Ford and Volkswagen will have an equal stake in Argo AI, with a substantial combined majority shareholding. The remainder will be used as an incentive pool for Argo AI employees.

Volkswagen will invest $2.6 billion in Argo AI by committing $1 billion in funding and integrating its $1.6 billion Autonomous Intelligent Driving (AID) company, which includes more than 200 employees – most of whom have been developing self-driving technology for the Volkswagen Group.

The German manufacturer will also purchase $500 million worth of Argo AI shares over the next three years. Ford’s investment will cover the remaining $600 million of its previously announced $1 billion investment in Argo AI.

Ford President and chief executive officer Jim Hackett said: “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.

“Unlocking the synergies across a range of areas allows us to showcase the power of our global alliance in this era of smart vehicles for a smart world.”

Company leaders also announced Ford will use Volkswagen’s dedicated electric vehicle architecture and Modular Electric Toolkit – or MEB – to deliver a high-volume zero-emission vehicle in Europe starting in 2023.

Ford expects to deliver more than 600,000 European vehicles using the MEB architecture over six years, with a second all-new Ford model for European customers under discussion.

Volkswagen started developing its MEB architecture in 2016, investing approximately $7 billion in the platform. The carmaker is planning to use this platform to build approximately 15 million cars for the Volkswagen Group alone in the next decade.

Volkswagen chief executive officer Dr. Herbert Diess said: “Scaling our MEB drives down development costs for zero-emission vehicles, allowing for a broader and faster global adoption of electric vehicles. This improves the positions of both companies through greater capital efficiency, further growth and improved competitiveness.”

The alliance does not involve any cross-ownership between the two companies and is independent from the joint investment into Argo AI.

Other EV projects include medium pickup trucks for global customers, which will start production in 2022, followed by commercial vans.

Michelle Krebs, executive analyst at Autotrader, predicted more consortiums and cross-boundary partnerships in future, adding: “Ford and VW’s alliances collaborating on autonomous vehicles through Argo AI and electric vehicles makes sense.

“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.”

Pictured: Volkswagen CEO Dr. Herbert Diess (left) and Ford President and CEO Jim Hackett