A broader alliance expected between Ford Motor Co. and Volkswagen AG has the potential to transform the global automotive industry and increase pressure on other carmakers in areas including electric and autonomous vehicles, analysts said.
The tie-up has been in the works for months and is another in a long string of industry partnerships as auto companies and tech firms try to spread the enormous costs of developing self-driving and electric vehicles.
Volkswagen will provide not only the vehicle architecture, but also batteries, for up to 600,000 examples of the auto, and the companies are continuing discussions to build a second MEB-based electric model for Ford of Europe with almost as large a volume, and VW CEO Herbert Diess allowed that Ford EVs based on the platform could also come to the USA, though none are now planned.
The cooperation with VW on electric vehicles in Europe is part of Ford's previously disclosed $11.5 billion EV investment worldwide.
It has sought outside investors to help share the spiraling cost of developing autonomous vehicle technology.
Volkswagen will contribute its Autonomous Intelligent Driving (AID) company to the venture. VW will also purchase $500 million in Argo shares over the next three years.
Ford Chief Executive Jim Hackett said at a news briefing on Friday in NY he expects "chimneys of data that will be spewing from the vehicles" that will use Argo's self-driving technology.
Also under the deal, Ford will use VW's new modular electric vehicle underpinnings to build zero-emissions vehicles for the European market starting in 2023.
VW CEO Herbert Diess, left, Ford CEO Jim Hackett, right.
The broader Ford-VW alliance, which covers collaboration beyond joint investments in Argo AI, does not entail cross-ownership between the two companies.
Also this year, Ford said it would invest $500 million in USA electric vehicle startup Rivian, while Fiat Chrysler is in talks to produce self-driving commercial vehicles with startup Aurora.
Ford will engineer and build "compact pickups" for both brands by 2022, and Ford will make the larger commercial vans by 2023, while Volkswagen plans to build a new city van.
By potentially licensing its electric-vehicle platform to Ford, VW could guarantee some profit from electric vehicles next year and gain "an unassailable scale advantage in the market", said Angus Tweedie, a Citigroup analyst.
The automakers could outline more than one agreement.
Shares of Ford rose 1.6 percent in early trading Friday.
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