Ford and Volkswagen have significantly expanded their global alliance with agreements to collaborate on electric vehicles and self-driving technology, as they look to bulk up against the storms battering the global auto industry.
The deepening of the alliance will see VW invest $2.6bn in Argo AI, the Ford-backed driverless technology start-up, in a deal that values the group at more than $7bn. VW will also begin testing self-driving cars in Europe.
The agreement between Ford and VW will also see the US company build a mass-produced electric vehicle in Europe using the German group’s in-house development and manufacturing system for battery cars. The pair have promised annual savings for both companies by allowing them to avoid duplicating investment costs.
Car companies are seeking scale to combat falling sales in Europe, the US and China as well as the investment demands of new technologies such as electric and hybrid cars to meet tightening emissions rules. Toyota has joined forces with Subaru and Suzuki to invest in electric cars, while the Renault-Nissan alliance, despite recent difficulties, claims it benefits both carmakers.
“Our global alliance is beginning to demonstrate even greater promise, and we are continuing to look at other areas on which we might collaborate,” said VW chief executive Herbert Diess.
Ford and VW launched their global alliance in January with the development of commercial vehicles and a pick-up truck. Together, the two sell close to 16m cars a year, or almost one in five vehicles sold globally.
VW will give $1bn in funding to Argo AI, as well as folding Audi’s self-driving team at AID into Argo’s new Munich office, which will also continue to hire. Ford and VW will both have equal stakes, and together hold a “substantial majority” of the shares, with the remainder held by employees.
Following the investment from VW, Argo AI will begin testing vehicles in Europe, as well as adapting its software to operate in different cities and regulatory environments. Both companies will integrate Argo’s systems into their own purpose-built vehicles, rather than working on a single combined project. The groups did not provide details of which vehicles or brands would be used.
“This is a really meaningful deal,” Bryan Salesky, Argo AI’s chief executive, told the Financial Times, adding that the company was the first group to prepare to deploy fully driverless operations in both the US and Europe.
Jim Hackett, Ford’s chief executive, 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.”
A strengthening of the alliance will also see Ford use VW’s electric production system to make a pure-battery car for Europe, with expected sales of 600,000 vehicles over six years, starting from 2023. Production of a second battery vehicle by the US carmaker is also under discussion.
This will help the company, which has been slow to introduce electric vehicles into its fleets, hit CO2 emissions targets in the EU during the coming decade, and cater to the expected growth in public demand for battery cars.
It is also the first time a major auto group has agreed to license VW’s electric system, which the German carmaker developed for $7bn and has been hoping to sell to rivals.
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