After ending its ties with self-driving developer Aurora earlier this year, Volkswagen on Friday disclosed that it is now investing $2.6 billion in Ford’s autonomous-car partner, Argo AI. This deal, that values the operation at more than $7 billion, is part of a broader alliance between Volkswagen and Ford that covers autonomous and electric vehicles.
“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,” Ford Chief Executive Officer Jim Hackett said.
Under this alliance, Ford and Volkswagen joining forces to take advantage of each other’s strengths. While Ford is ahead of Volkswagen in the autonomous driving field, Volkswagen is more advanced than Ford in electric cars. Volkswagen plans to merge its Munich-based subsidiary, Autonomous Intelligent Driving (AID) including its 200 employees and the intellectual property they’ve developed into Argo. Argo AI, that was founded in 2016, boasts of 500 employees and with this merge, it will increase to 700.
Before coming to Argo AI, Bryan Salesky, its chief executive worked for Google. He believes that this deal will help his company scale. He, in a Reuters interview, said, “We have two great customers and investors who are going to help us really scale and are committed to us for the long term.” He further said that Argo is open to additional strategic or financial investors to help share the costs of bringing self-driving vehicles to market. “We all realize this is a time-, talent- and capital-intensive business,” he said.
Ford and VW, Argo’s two investors will hold equal, minority stake in the startup that together make up a majority. Like its employee count, Argo’s board will also expand from five to seven members.
This investment looks promising for Volkswagen, as it opens an opportunity to catch up with Alphabet Inc.’s Waymo, and General Motors Co.’s Cruise unit. Given that this field is so resource-intensive it makes sense to make alliances to achieve the goal. Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in Germany, said in an email to the New York Times, “Autonomous driving is a very, very expensive technology. One has to invest today in order to make the first sales in 2030, maybe. Therefore it makes a lot of sense for Ford and VW to work together.”