Ford, VW to jointly develop new vehicles
• Firms in co-ownership of autonomous cars venture
Ford Motor and Volkswagen say they will spend billions of dollars to jointly develop electric and self-driving vehicles, deepening a global alliance to slash development and manufacturing costs while positioning Volkswagen as the initial winner.
Ford and Volkswagen executives said the latest collaborations could save hundreds of millions of dollars for each company. But the projects would take time to develop, and the size and timing of the payoffs were unclear.
The latest iteration of the Ford-Volkswagen alliance suggests the German carmaker may hold the more lucrative cards, for now.
Volkswagen has agreed to plough $3.1bn into Ford’s Argo AI self-driving unit, but estimates it could realise up to $20bn in revenue by sharing its MEB electric vehicle (EV) architecture with Ford in Europe.
The two firms are still discussing additional deals, including an extension of the EV sharing arrangement to other Ford vehicles, which could further boost Volkswagen’s take.
The two have already started co-operating in the area of commercial vehicles and mid-size pickup trucks as part of the auto industry’s broader effort to redraw production and sales footprints to cope with more stringent regulation and fragmented markets.
Executives declined to put a value on the potential revenue generated by the data to and from their respective selfdriving vehicles.
Ford CEO Jim Hackett said he expects “chimneys of data that will be spewing from the vehicles” that will use Argo’s selfdriving technology.
Volkswagen will invest $2.6bn in Argo AI, Ford’s selfdriving cars venture, and will buy $500m worth of Argo shares from Ford, giving the two vehicle makers equal stakes in the start-up.
Evercore ISI analysts said the deal’s structure suggested each company will own about 40%, with Argo owning the rest.
Volkswagen CEO Herbert Diess said at the briefing the Argo platform was “the best solution for Volkswagen” to speed self-driving vehicles to market, and that Ford and Volkswagen together intend to make that platform “a global industry standard”.
Any partnerships added in the future “will probably be outside of the auto industry,” Ford’s president of new businesses, technology and strategy, Jim Farley, said when asked if this was a possibility.
Ford and Argo officials said moving goods was as much a focus as moving people, with Ford focused on offering services to consumers.
Ford officials said they remained committed to launching autonomous vehicles by 2021, but Farley said large-scale commercialisation would occur many years after that.
Ford, whose shares were up about 1%, also will build an electric car in Europe, starting in 2023, using Volkswagen’s MEB electric vehicle platform.
“Our global alliance is beginning to demonstrate even greater promise, and we are continuing to look at other areas on which we might collaborate,” Diess said.
Ford expects to build 600,000 electric vehicles in Europe over six years, sourcing components and the vehicle underpinnings from Volkswagen, helping both to cut costs.
Ford Automotive president Joe Hinrichs said it would take four years to design Ford’s electric car around Volkswagen’s MEB architecture, and retool a Ford of Europe plant to build the vehicle.
Volkswagen said it had committed $7bn to its MEB platform, which is expected to underpin 15-million vehicles worldwide from the Volkswagen group over the next decade.
Much of the MEB’s development cost could be recovered from the revenues generated from Ford. Diess said Ford would pay Volkswagen “set by set” for the use of its electric vehicle components.
Analysts at Citi said Ford’s licensing of Volkswagen’s MEB platform was a transformational step for both companies.
“It likely provides Volkswagen with an unassailable scale advantage,” Citi analyst Angus Tweedie said in a note published on July 10.
The co-operation with Volkswagen on electric vehicles in Europe is part of Ford’s previously disclosed $11.5bn EV investment worldwide.
Hinrichs said the collaboration would not affect Ford’s plan to launch two new electric vehicles in the US, including a battery-powered version of the F-150 pickup and a new Mustang-inspired crossover vehicle expected to be called Mach E.
Suppliers familiar with Ford’s plans say the number two US vehicle maker is developing a broader portfolio of electric vehicles, most of them crossovers that will carry the Ford and Lincoln brands, for North America and China.
Many of those models will be built on an updated version of Ford’s C2 global compact platform, they said. It was not clear if some of those future Ford EVs could migrate to Volkswagen’s MEB platform, versions of which the German company will build in Europe, China and North America. The broader Ford-VW alliance, which covers collaboration beyond joint investments in Argo AI, does not entail cross-ownership between the two companies.
Ford created Ford Autonomous Vehicles in 2018, pledging to invest $4bn until 2023 and has sought outside investors to help share the spiralling cost of developing autonomous vehicles.
Volkswagen will contribute its Autonomous Intelligent Driving company to Argo, which will boost the self-driving unit’s employees to 700 from 500.
VOLKSWAGEN AND FORD TOGETHER INTEND TO MAKE THE ARGO PLATFORM ‘A GLOBAL INDUSTRY STANDARD’