Volkswagen joined Ford as an investment partner in autonomous technology company.

Volkswagen joined Ford in investing in Argo AI, the autonomous vehicle platform company. The alliance will allow both automakers to independently integrate Argo AI’s self-driving system into their own vehicles.

Working together with Ford and Volkswagen, Argo AI’s self-driving system (SDS) is the first with commercial deployment plans for Europe and the U.S. Plus, being able to tap into both automakers’ global reach, Argo AI’s platform has the largest geographic deployment potential of any autonomous driving technology to date. Volkswagen and Ford independently will integrate Argo AI’s SDS into purpose-built vehicles to support the distinct people and goods movement initiatives of both companies.

Argo AI’s focus remains on delivering a SAE Level 4-capable SDS to be applied for ride sharing and goods delivery services in dense urban areas.

Ford and Volkswagen will have an equal stake in Argo AI, and combined, Volkswagen and Ford will own a substantial majority. The remainder will be used as an incentive pool for Argo AI employees. The full transaction is subject to regulatory approvals and closing conditions.

Ford and Volkswagen are Merging?

No. This will be a strategic partnership, not a merger.

Ford President and CEO Jim Hackett made that point very clear in his statement concerning the partnership.

“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,” Hackett said. “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.”

Quite simply, each company held exclusive access to resources the other needed.

Ford committed to investing $1 billion over 5 years in February 2017. That agreement gave Ford licensing control.

For its part, Volkswagen had already invested close to $7 billion since 2016 in it’s own electric vehicle platform ID and Modular Electric Toolkit (MEB). Volkswagen had also formed an AV technology of its own, Autonomous Intelligent Driving (AID) company valued at $1.6 billion.

As part of the deal, AID will become part of Argo AI.

Everyone Gets What They Want

In any industry, research and development costs can represent a huge risk to growth.

With EV and AV technology, the outcomes must work. Poor performance of AV systems could prove disastrous. Automakers understand they have to get AV right the first time. Otherwise, an already skeptical consumer market could be turned off.

Argo AI provides a close-to-market ready AV platform. Unlike VW who formed their own autonomous vehicle, Ford took advantage of the Argo AI’s need for investment to continue development.

Volkswagen meanwhile already had a fully developed EV platform ready for production. For VW—in order to take make the MEB platform profitable—scaling production to reduce production costs became a priority.

Now Ford gets access to VW’s MEB. VW gets access and partial ownership of the latest and greatest AV technology. Argo AI gets much needed investment and market reach.

Volkswagen and Ford Banking on EV/AV — At Least in Europe

Ford plans to design an all-new, MEB-platform-based EV model, which starts arriving in 2023, in Köln-Merkenich, Germany. Volkswagen will supply MEB parts and components as part of the collaboration.

Both companies also will continue to target additional areas where they can work together on electric vehicles – a key strategic priority for both companies as they drive to accelerate the transition to sustainable and affordable mobility.

The agreement with Ford is a cornerstone in Volkswagen’s electric strategy, supporting the growth of the e-mobility industry and facilitating global efforts to reach the Paris 2050 Agreement.