Volkswagen takes stake in Ford’s Argo AI, another cold war front to fight?

Volkswagen and Ford have signed a cooperation agreement, which will see the pair develop electric vehicle (EV) and self-driving technologies. Part of the deal sees VW invest $2.6bn into Argo AI, which values the AI-focused startup at $7bn.

Ford was an early investor in Argo, buying an undisclosed stake for $1bn back in 2017, and now the pair hold equal stakes – as VW is investing $1bn in cash, while committing another $1.6bn using its Autonomous Intelligent Driving (AID) subsidiary, which will be merged into Argo.

To this end, AID’s headquarters is now becoming Argo’s European location, in Munich. While regulators could get involved, it looks like VW and Ford are beginning a process (Ford is selling Argo shares to VW) to become equal partners in Argo, which has been developing the self-driving technologies that are needed to power autonomous vehicles.

VW seems to have picked Argo over its former partner Aurora Innovation, which was meant to be providing a self-driving stack to VW that was announced at CES 2018. VW opted not to renew its deal with Aurora, while at the time the news became public, Fiat Chrysler (FCA) announced that it would be using Aurora – a startup that counts Amazon, Hyundai, and Byton as investors.

“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,” said Ford CEO Jim Hackett.

For Ford, its holding in the AI side of things has now given it access to the electrification side, as Ford will become the first major automotive adopter for VW’s Modular Electric Drive Matrix (MEB – Modulare E-Antriebs-Baukasten), a design specification that is intended to serve as the foundation for all manner of EVs, across different classes.

VW says the approach is fundamentally different to older fossil-fuel architectures, and Ford believes it will sell 600,000 vehicles in Europe in six years, based on the MEB design that will be unveiled in 2023. e.GO Mobile was the first partner, but Ford decision might spur other rivals into the MEB ecosystem. Ford and VW also talk about developing commercial vans and medium pickups in 2022, sharing the development costs, as part of the Volkswagen-Ford Global Alliance.

However, Ford has made a pretty big deal of its decision to ditch cars, to focus on its SUVs, trucks and Mustangs in North America – killing the Fiesta, Focus, and Taurus in 2019, with the Fusion and Active having an open-ended expiration date. This is not yet a global policy, but the surging popularity of SUVs in Europe and APAC means that this trend could catch on in other territories, for both Ford and its rivals.

VW CEO Herbert Diess said “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.”

For Volkswagen, the Ford cooperation should give it access to Argo’s expertise, but signing up a major partner for the electrification platform is a necessary distraction from the Dieselgate fiasco that so badly damaged VW’s reputation. To this end, VW seems to be one of the most enthusiastic automakers, when it comes to electrification.

In theory, Argo is going to treat Ford and VW as separate customers, which should mean it can secure other rival automakers as new business. Argo has been developing software and mapping systems for self-driving vehicles, previously for Ford. Now of course, those developments will be used by VW.

Argo is aiming for SAE Level 4 capabilities, which are intended to drive vehicles that are still equipped with controls for manual operation by human drivers. SAE Level 5 would do away with those controls entirely, and SAE Level 3 is being avoided like the plague, due to its messy legal and liability issues – with regard to the handover between advanced cruise control and human intervention. Because SAE Level 3 essentially still requires a human sitting at the wheel and paying full attention, it is not a particularly desirable tool for drivers.

Two weeks ago, we wrote about the new Intel-led Safety First of Autonomous Driving (SFAD) framework, and how it looked like a very political move to create a coalition against the rival Nvidia ecosystem. Notably, VW is an SFAD supporter, while Ford appears to be absent from either side of the looming conflict.

Continuing this line of reasoning, it seems likely that we are going to see some more fronts open up in the labyrinthine web of loyalties and alliances between the automakers and their OEM suppliers. Waymo still seems well ahead, in terms of its technical capabilities, and it counts Renault-Nissan as a customer, after a deal to deploy self-driving minivans in France and Japan.

There has been renewed activity from Apple, which snapped up amidst its death throes. GM’s Cruise Automation is now valued at $19bn, and counts both GM and Honda as customers, while Uber continues to chug along, in a deal with Volvo to deploy a self-driving SUV.