A Ford-VW alliance with Argo could redraw self-driving sector

  • TECH
  • Friday, 12 Jul 2019

Argo AI modified Ford Motor Co. Fusion autonomous vehicles sit parked in a garage at the company's headquarters in Pittsburgh, Pennsylvania, U.S., on Thursday, Aug. 16, 2018. The investment in Argo AI, a self-driving startup, is Ford's way of trying to catch up to Alphabet Inc.'s Waymo and General Motors Co. in the driverless derby. Ford took a majority stake in Argo last year and expects to deploy autonomous vehicles running its system in a money-making business by 2021. Photographer: Justin Merriman/Bloomberg

DETROIT: An expanded alliance between Ford Motor Co and Volkswagen AG that includes a partnership in Ford self-driving unit Argo AI could redraw the balance of power in autonomous vehicles. 

A Ford-VW collaboration with Argo, the Pittsburgh-based start-up that has spearheaded Ford’s self-driving development since 2017, could help reduce the engineering and financial burdens on each automaker. It could also accelerate the deployment timetables of both, which have said they plan to put autonomous vehicles into operation in 2021. 

Argo has been overlooked as Waymo, Alphabet Inc’s self-driving subsidiary, has deployed its robo-vans, and General Motors Co’s Cruise Automation subsidiary has raked in billions of dollars in investments. 

With VW, the world’s biggest automaker by sales volume last year, Argo would be aligned with a partner with substantial scale and resources. 

Ford and VW said on July 11 they are expanding their global alliance and that the two companies’ chief executives would hold a news conference in New York on Friday, where they are expected to announce details on a technology-sharing agreement. 

A Ford-VW deal that involves Argo could also have broader implications for similar alliances, as well as valuations of related startup companies. 

Earlier estimates of Argo’s value have ranged from US$2bil (RM8.22bil) to US$4bil (RM16.44bil). Depending on the size of a VW investment, that valuation could rise to US$7bil (RM28.78bil), according to a source familiar with the Ford-VW discussions. 

In comparison, the value of Cruise jumped to US$19bil (RM78.11bil) earlier this year after it attracted more than US$6bil (RM24.66bil) in investments from SoftBank Group, Honda Motor Co and T. Rowe Price. 

The value of ride services firm Uber Technologies’ Advanced Technologies Group climbed to more than US$7bil (RM28.78bil) earlier this year after SoftBank, Toyota Motor Corp and Denso Corp invested US$1bil (RM4.11bil). 

Those valuations are dwarfed by the estimates for Waymo, which is widely acknowledged as the sector leader. Morgan Stanley values Waymo at up to US$175bil (RM719.51bil), while Jefferies values the company at up to US$250bil (RM1.02tril). 

Both estimates take into account Waymo’s nascent robotaxi business and potential future revenue streams from a delivery service and from streamed in-vehicle services, including e-commerce and infotainment. 

VW, whose Audi unit heads the German automaker’s Automated Intelligence Driving (AID) unit in Munich, reportedly considered a US$13.7bil (RM56.32bil) investment last year in Waymo for a 10% stake that would have valued Waymo at US$137bil (RM563.27bil). 

VW recently concluded a development agreement with Aurora, the Silicon Valley self-driving startup that includes Hyundai Motor Co and Fiat Chrysler Automobiles among its customers. Fiat Chrysler also supplies vehicles to Waymo. 

Aurora is valued at US$2.5bil (RM10.27bil). Investors include Hyundai and Amazon Inc. 

Argo, which is majority-owned by the No 2 US automaker, is part of Ford Autonomous Vehicles LLC. Ford set up the unit in 2018, pledging to invest US$4bil (RM16.44bil) until 2023. – Reuters

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