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Volkswagen Closes on its $2.6 Billion Investment in Self-Driving Startup Argo AI

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【Summary】In one of the biggest collaborations in the auto industry for the development of self-driving cars, German automaker Volkswagen announced it closed on its $2.6 billion investment in Argo AI, the autonomous driving startup majority-owned by U.S. automaker Ford Motor Co.

Eric Walz    Jun 02, 2020 10:50 AM PT
Volkswagen Closes on its $2.6 Billion Investment in Self-Driving Startup Argo AI
A fleet of self-driving Ford Fusion sedans outfitted with Argo AI's technology. (Photo: Argo AI)

In one of the biggest collaborations in the auto industry for the development of self-driving cars, German automaker Volkswagen announced it closed on its $2.6 billion investment in Argo AI, the autonomous driving startup majority-owned by U.S. automaker Ford Motor Co. 

Its the latest example of a legacy automaker forming an alliance with a promising tech startup to jumpstart the development of autonomous driving technology, as automakers around the world race to be the first to deploy autonomous vehicles at scale.

Argo AI was a little known Pittsburgh-based autonomous driving and robotics startup until Feb, 2017, when Ford invested a $1 billion to acquire a majority stake in the young startup.

At the time, Ford was looking to advance its own autonomous driving development with assistance from Argo. After the $1 billion investment by Ford, Argo AI CEO Brain Salesky said that the automaker was not acquiring his company. Instead, Ford would allow Argo to continue to operate as an independent company, which it still does. 

The plans for Ford and Volkswagen to work together with Argo AI began taking shape in early 2019, when Volkswagen first expressed interest in investing in the Pittsburgh-based startup.

By July 2019, Ford and Volkswagen first revealed plans for a collaboration with Argo AI to introduce autonomous vehicle technology in the U.S. and Europe. As part of the collaboration, Volkswagen said it would join Ford in investing in Argo AI and the three companies will work together to develop autonomous driving technology.

"Working together with Argo AI positions both Ford and Volkswagen to better serve our future customers while improving cost and capital efficiencies. While the uncertainty of today's business environment has created challenges for partnerships and investments in the self-driving space, this collaboration remains on track and will be a positive development for everyone involved."  said John Lawler, CEO, Ford Autonomous Vehicles LLC and Ford Motor Company Vice President, Mobility Partnerships.

Argo AI's partnership with Volkswagen includes the contribution of VW's Munich-based Autonomous Intelligent Driving (AID) team. AID is a wholly owned subsidiary of Volkswagen's luxury division Audi and was established to develop autonomous driving technology for the Volkswagen Group. The AID offices in Munich will now serve as the new European headquarters and fifth location for Argo AI. 

In addition to its Pittsburgh headquarters, Argo AI has offices in Detroit, Palo Alto, and Cranbury, N.J., with additional fleet operations in Miami, Washington, D.C., and Austin where it deploys its self-driving vehicles for testing.

Ford & Volkswagen Will Share Development Costs of Self-Driving Technology

The partnership will allow Ford and Volkswagen to share development costs of self-driving technology as billions of dollars are being invested in the space by automakers racing to be the first to deploy autonomous vehicles. 

Ford has already committed to spending more than $4 billion through 2023 on the development of autonomous driving technology.  A large part of this investment is dedicated to developing a self-driving system that can be integrated into production vehicles. The two automakers will share the cost of developing Argo AI's technology.

In addition to shared development costs, the deal with Volkswagen makes Argo AI's self-driving software the first with commercial deployment plans for both Europe and the U.S. 

In a blog post, Lawler wrote that Argo AI's platform has the "largest geographic deployment potential of any autonomous driving technology to date, which are important factors in developing a self-driving system that is robust and cost efficient."

In Feb, 2019, Volkswagen CEO Herbert Diess said in January his company is "committed" to owning the software stack that will control self-driving cars, and any arrangement with Ford would address this.

Ford said it will remain independent and fiercely competitive in building its own self-driving mobility service. The automaker said that sharing development costs with Volkswagen does not mean the automaker is reducing its overall spending in the autonomous vehicle space. Instead, Ford will reallocate the money for building a unique customer experience including transportation as a service software development and fleet operations. 

"There are several important parts to developing a great self-driving service including the self-driving software, vehicle development, fleet operations and the customer experience. To be successful in this space, a company needs to look at every aspect of the business," Lawler wrote in its blog post.

"Now, with Volkswagen's investment in Argo AI complete, we can spend even more time and care ensuring we remain true to our goal."

Other Automakers Are Also Partnering with Tech Companies

VW and Ford join rival automaker General Motors who already has its own deal in place with San Francisco-based self-driving startup Cruise and Japanese automaker Honda Motor Co. 

GM purchased San Francisco-based Cruise in 2016 for a reported $1 billion to jumpstart its own autonomous driving development.

In Oct 2018, Japan's Honda Motor Co announced it will work jointly with Cruise and GM to develop a purpose-built autonomous shuttle for Cruise that can be manufactured at high volume for global deployment, as well as explore opportunities for commercial deployment of the Cruise robotaxi network.  The Cruise Origin autonomous shuttle unveiled in San Francisco in January was a result of those efforts. 

Honda is contributing approximately $2 billion over 12 years along with a $750 million equity investment in Cruise, bringing its total commitment to the project to $2.75 billion.

In June 2019, 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 future Hyundai and Kia's models. 

In addition to Volkswagen's $2.6 billion investment in Argo AI, Ford plans to use Volkswagen's dedicated Modular Electric Toolkit or "MEB" electric vehicle architecture for new electric models. 

Using Volkswagen's MEB architecture is part of Ford's $11.5 billion investment in electric vehicles worldwide. 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 its MEB platform could be the foundation for up to 15 million electric vehicles it plans to build over the next decade.

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