VW BETS ON DRIVERLESS CARS
Deal brings startup’s valuation to $ 7 billion
Volkswagen is investing $ 2.6 billion in Pittsburgh- based self- driving vehicle company Argo AI.
Argo AI, the self- driving car startup known for its $ 1 billion partnership with Ford, has just bolstered its portfolio with a multibilliondollar contract with another car manufacturer: Volkswagen.
The Wolfsburg, Germany- based company — known for its quirky Beetle and compact sedan, the Jetta — announced Friday morning that it will invest $ 2.6 billion into Argo AI as part of a new dual venture with Ford to build autonomous vehicle solutions.
That investment, rumored for months prior, brings Strip Districtbased Argo’s valuation to $ 7 billion, making it yet another “unicorn” technology startup, or a company that has amassed a valuation of over $ 1 billion. That also means it’s likely the highest valued startup company in the Pittsburgh region.
Specifically, the Volkswagen deal breaks down into $ 1 billion in direct funding and the contribution of its Autonomous Intelligent Driving company, which is valued at $ 1.6 billion.
As a result, Ford and Volkswagen, Argo’s only two customers and investors to date, will each hold equal shares in the startup. Any remaining equity belongs to employees.
It’s part of a larger partnership between Ford and Volkswagen to create self- driving and electric vehicles. The idea is that through partnering, both companies can bring down their costs of development. Jessica Caldwell, executive director of industry insights for the Edmunds. com auto pricing site, said the deal should help both companies and is an example of what’s needed in the business to share enormous capital costs.
“Ford has taken flak for years for not having a robust EV strategy and VW has had its own fair share of challenges, but this can help both companies reinvent themselves as innovative technology leaders,” she said. “The combination of these two massive automakers is exactly what needs to happen to accelerate the adoption of AV and EV technology.”
While Argo will consider each firm separate customers, there will be some cross- collaboration.
With the addition of Volkswagen’s self- driving technology team, Argo will establish its European headquarters in Munich. That means the team will grow by 200 employees, bringing total headcount to 700 across the company.
Argo also tests its self- driving vehicles in Detroit, Miami, Washington, D. C., and Austin, Texas.
The company has also gotten the green flag to test in Palo Alto, Calif., though that pilot hasn’t officially started yet.
According to CEO Byran Salesky, a Pittsburgh native, the Volkswagen team makes Argo the first selfdriving company with rollout plans for both the U. S. and European markets.
Significantly, the addition of Volkswagen as a partner brings Argo’s business vision to life. The company has always wanted to create a technology platform that could be specially adapted to suit multiple partners’ automobiles, rather than partnering with just one firm or developing a retrofit system.
Pete Rander, the president of Argo AI, told the Post- Gazette last September that this model leads to close collaboration between the startup and the partner firm and also creates a direct pipeline of customers.
“If you’ve ever tracked many startups ... there’s always this question of how are you going to get enough customer base to sustain your business?” Mr. Rander said.
A built- in client like Ford or Volkswagen gives Argo a competitive advantage over other self- driving firms, he explained.
This partnership model also keeps Argo from redeveloping the wheel — literally. By working with massive automobile manufacturers, which are used to scaling and already have decades of experience in car development, Argo’s time to market is greatly reduced and costs are lowered.
“From both a safety and scalability standpoint, it’s a key strategic advantage, and we believe we are the only self- driving company with such close working relationships,” Mr. Salesky wrote in a blog post on Friday.
Volkswagen’s investment comes just after it broke a deal with another Pittsburgh- based self- driving startup, Lawrencevillebased Aurora Innovation.
In June, the companies announced they had split after about a year and a half of working together.
Argo and Ford are eyeing 2021 as the year the duo will officially put out an autonomous fleet service. Mr. Rander says they’re poised to meet that goal. It’s unclear when Volkswagen plans to have a similar service.
“It’s a long road, we often talk about it as a marathon to get there, not a sprint,” he said.