Ford Motor Company and Volkswagen AG are expanding their global alliance to include electric vehicles—and will collaborate with Argo AI to introduce autonomous vehicle technology in the US and Europe. Volkswagen is joining Ford in investing in Argo AI, the autonomous vehicle technology platform company. (Earlier post.)

In 2017, Ford announced it would invest $1 billion over five years in Argo AI—an artificial intelligence software startup founded by former Google and Uber leaders—to develop an SAE Level 4 virtual driver system for the automaker’s autonomous vehicle coming in 2021, and for potential license to other companies.

Working together with Ford and Volkswagen, Argo AI’s self-driving system (SDS) is the first with commercial deployment plans for Europe and the US. Plus, being able to tap into both automakers’ global reach, Argo AI’s platform has the largest geographic deployment potential of any autonomous driving technology to date. Volkswagen and Ford independently will integrate Argo AI’s SDS into purpose-built vehicles to support the distinct people and goods movement initiatives of both companies.

Argo AI’s focus remains on delivering a SAE Level 4-capable SDS to be applied for ride sharing and goods delivery services in dense urban areas.

Ford and Volkswagen will have an equal stake in Argo AI, and combined, Volkswagen and Ford will own a substantial majority. The remainder will be used as an incentive pool for Argo AI employees. The full transaction is subject to regulatory approvals and closing conditions.

Company leaders also announced Ford will become the first additional automaker to use Volkswagen’s dedicated electric vehicle architecture and Modular Electric Toolkit (MEB) to deliver a high-volume zero-emission vehicle in Europe starting in 2023.

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

Volkswagen started developing its MEB architecture in 2016, investing approximately $7 billion in this platform. The car-maker is planning to use this platform to build approximately 15 million cars for the Volkswagen Group alone in the next decade.

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

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. 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.

— Volkswagen CEO Dr. Herbert Diess

The alliance, which covers collaborations outside of Volkswagen and Ford’s joint investments in Argo AI, does not entail cross-ownership between the two companies and is independent from the investment into Argo AI. The alliance is governed by a joint committee, which is led by Hackett and Diess and includes senior executives from both companies.

The companies also are on track to deliver medium pickup trucks for global customers, aiming to start in 2022, followed by commercial vans.

Equal Shareholders in Argo AI. Volkswagen 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—most of whom have been developing self-driving technology for the Volkswagen Group.

As part of the transaction, Volkswagen also will 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.

The full transaction represents a valuation for Argo AI that totals more than $7 billion.

Both automakers see significant potential, including profitable growth by tapping new business areas tied to autonomous 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 for safe, reliable and durable deployment in ride sharing and goods delivery services.

Based in Munich, Germany, AID will become Argo AI’s new European headquarters and will be led by AID’s current CEO Karlheinz Wurm. With the addition of AID employees, Argo AI will grow from 500 to more than 700 employees globally.

In addition to its global headquarters in Pittsburgh, Pa., the new location marks Argo AI’s first engineering center in Europe and the fifth globally in addition to Dearborn, Mich.; Cranbury, NJ; and Palo Alto, Calif. Collaborating with Ford, Argo AI also is testing its technology in Miami and Washington, D.C., where together they plan deployment of commercial services.

Ford to Use Volkswagen’s MEB Electric Vehicle Architecture for 600,000 Vehicles. Ford plans to design an all-new, MEB-platform-based EV model, which starts arriving in 2023, in Köln-Merkenich, Germany. Volkswagen will supply MEB parts and components as part of the collaboration.

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

Commercial Van and Pickup Collaboration On-Track. 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. The work on these vehicle lines will create significant efficiencies for each company.

Ford will engineer, source and build the previously announced medium pickup for both companies for customers in Europe, Africa, the Middle East, Asia Pacific and South America, with trucks expected to arrive in key markets as early as 2022.

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

As both companies expect customer demand for medium pickups and commercial vans to grow globally in the next five years, collaborating on these key segments will allow better technologies and more innovation to reach their respective customers more quickly, with better plant capacity utilization.