Volkswagen Investing $2.6 Billion in Ford's Self-Driving Arm Argo AI and Will Collaborate On Electric & Autonomous Vehicles

author: Eric Walz   

Volkswagen CEO Dr. Herbert Diess and Ford President and CEO Jim Hackett

In one of the biggest collaborations between two global automakers and a tech startup, the Ford Motor Co and Volkswagen AG announced today that they will work together on electric and self-driving cars. 

Volkswagen CEO Dr. Herbert Diess, Ford President and CEO Jim Hackett and Argo AI CEO Bryan Salesky appeared together at a New York press conference today to announce the new partnership.

As part of the agreement, Volkswagen will invest $2.6 billion in Ford's autonomous driving division Argo AI and Argo will supply self-driving technology to both automakers. Ford and Volkswagen have been in talks since last year on a potential partnership on autonomous driving technology before today's official announcement.

Volkswagen said it will invest $2.6 billion in Argo AI by committing $1 billion in funding and contributing its $1.6 billion Autonomous Intelligent Driving (AID) company, which includes more than 200 employees developing self-driving technology for the Volkswagen Group. 

AID, which is based in Munich, will become Argo AI´s new European headquarters and will be led by AID's current CEO Karlheinz Wurm. With the addition of the AID employees, Argo AI will grow from 500 to over 700 employees globally.

Volkswagen will also purchase Argo AI shares from Ford for $500 million over three years. Ford will invest the remaining $600 million of its previously announced $1 billion cash commitment in Argo AI.

Both Ford and Volkswagen will have an equal stake in Argo AI, and together the two automakers will own a majority of the robotics startup. The remainder will be used as an incentive pool for Argo AI employees. 

The investment will give Argo a valuation of around $7 billion. 

"Argo AI is fortunate to have a world-class team  due to our clear mission and the commitment to deployment from our partners, and together with AID employees, we will have a global workforce to  attract even more of the best talent," said Salesky, co-founder of Argo AI. "Plus, thanks to Ford and Volkswagen, Argo AI technology could one day reach nearly every market in North America and Europe, applied across multiple brands and to a multitude of vehicle architectures."

The alliance covers collaborations outside of Volkswagen and Ford's joint investments in Argo AI and does not entail cross-ownership between the two companies and is independent from the investment into Argo AI. 

The automakers said the alliance will be governed by a joint committee, which is led by Hackett and Diess and includes senior executives from both companies.

Self-Driving Ford Fusion sedans developed by Argo AI

Ford invested $1 billion investment in Argo in Feb 2017 to jumpstart its own autonomous driving developement, back when the startup was a little-known Pittsburgh-based robotics company. At the time, Argo CEO Brain Salesky said that Ford was not acquiring his company, but that Ford will allow Argo to continue operate as a independent company, which will still be the case.

"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."

Working together with Ford and Volkswagen, Argo AI's commercial deployment of self-driving system (SDS) will be the largest geographic deployment potential of any autonomous driving technology to date. 

Argo AI's focus will remain on delivering a SAE Level 4-capable autonomous driving systems for ride-sharing and delivery services in dense urban areas. Level-4 autonomous systems are capable of operating without a human driver present.

Ford Will Use Volkswagen's "MEB" Electric Vehicle Architecture

Ford will become the first rival automaker to use Volkswagen's dedicated electric vehicle architecture and Modular Electric Toolkit or "MEB" to deliver a high-volume electric vehicle in Europe starting in 2023.

For Ford, using Volkswagen's MEB architecture is part of its more than $11.5 billion investment in electric vehicles worldwide.

The MEB architecture consolidates all of the vehicle's electronic controls and reduces the number of microprocessors. The MEB platform allows Volkswagen to configure electric models with either rear wheel or all-wheel-drive, using one or two electric motors, for more optimal weight distribution and better handling.

Volkswagen's MEB architecture can easily adapt to many different sizes of vehicles and battery capacities, while using shared components to help lower production costs. Volkswagen said that the MEB platform could be the foundation for up to 15 million electric vehicles it plans to build over the next decade. 

Volkswagen already invested around $7 billion developing the MEB architecture. The automaker is planning to use this platform to build approximately 15 million cars for the Volkswagen Group alone in the next decade.

"Looking ahead, even more customers and the environment will benefit from Volkswagen's industry-leading EV architecture. 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. "Scaling our MEB drives down development costs for zero-emissions vehicles, allowing for a broader and faster global adoption of electric vehicles. This improves the positions of both companies through greater capital efficiency, further growth and improved competitiveness."

Ford expects to deliver more than 600,000 European vehicles using Volkswagen's MEB architecture over six years, with a second all-new Ford model for European customers under discussion. 

The first vehicle from the partnership is due in 2022. The companies also are on track to deliver electric pickup trucks for global customers by 2022, followed by commercial vans.

Ford & Volkswagen Will Benift by Using Argo AI's Self-Driving Technology

Argo AI plans to work closely with Ford and Volkswagen to provide the autonomous vehicle technology the automakers need to deliver fully integrated self-driving vehicles that can be manufactured at scale.

Collaborating with Ford, Argo AI is currently testing its autonomous driving technology in Miami and Washington, D.C., where together they plan deployment of commercial services.

Both companies also will continue to target additional areas where they can work together on electric vehicles.

Ford and Volkswagen remain on track in their previously announced plan to improve their respective strengths in commercial vans and medium pickups in key global markets. Ford intends to engineer, source and build larger commercial vans for European customers starting in 2022, and Volkswagen intends to develop, source and build a city van for sale in Europe and other select global markets.

Volkswagen and Ford already have strong commercial van and pickup businesses around the world, with popular models including the Ford Transit lineup and Ranger pickup as well as the Volkswagen Transporter, Caddy and Amarok.

Both companies expect customer demand for medium pickups and electric commercial vans to grow globally in the next five years.

The collaboration between Volkswagen and Ford and a tech company is part of a broader trend of automakers turning to high-tech companies to quickly advance autonomous driving and electrification of new models.

General Motors, invested $1 billion in San Francisco-based self driving startup Cruise in Feb 2016. Cruise has been working closely with GM since its acquisition, refining its self-driving technology for a rumored robotaxi service GM plans to launch in 2019 using a fleet of self-driving Chevy Bolt EVs being developed by GM and Cruise. 

Last month, Silicon Valley-based autonomous driving startup Aurora which was founded by former Google, Tesla and Uber engineers announced a $600 investment from Hyundai Motor Company and Kia Motors to expand research and development of a self-driving platform for a wide range of Hyundai and Kia's models. 

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.