Weekly Brief: Pandemic Fails to Curb Driverless Advances

Commentary By Andrew Tolve

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3rd August 2020

The potential profitability of self-driving technology was on display last week.

Ford announced that despite its factories being closed for half of the second quarter because of COVID-19 while also losing $1.9Bn on its normal revenue and expenses, the carmaker managed a $1.12Bn net profit in Q2 thanks to the rising value of its self-driving car outfit, Argo AI. Ford invested $1Bn in Argo AI back in 2017, when the company was just a fledgling, six-month-old start-up founded by former Waymo and Uber autonomous tech experts.

It seemed like a risky bet at the time but Argo AI has since grown into a significant player in the self-driving car space, with expertise in software, hardware, maps and cloud-support infrastructure. In June Ford separated the outfit from its main company and Volkswagen invested $2.6Bn for a 40% share. Argo AI is now valued at $7.5Bn and Ford took home $3.5Bn as a result.

That’s not a shabby return on a three-year investment. Ford and VW will act as equal partners moving forward, with 40% ownership apiece. Argo AI’s founders own the remaining 20%. On his earning call with investors last week, Ford CEO Jim Hackett said the Ford-VW alliance “significantly strengthens Argo AI, which now combines unmatched expertise with the global reach of Ford and VW together. This positions Ford well as self-driving vehicles become a significant new source of revenue and profit in the years to come. The AV journey will be a long one but Ford is now well-positioned to run this race and compete like few others can”.

We’ll see about that last part. Sometimes partnerships work out when it comes to autonomous tech and sometimes they don’t. Two weeks ago I wrote about Waymo’s expanded partnership with Fiat Chrysler Automobiles, which seeks to take Waymo’s self-driving platform to the mass market across a range of FCA’s brands, including its RAM commercial vans. General Motors acquired Cruise but hasn’t partnered with another carmaker on the project since. Tesla is famously solitary. Mercedes-Benz and BMW combined their forces in 2019 to create a self-driving-car super team, only to disband that team this June, just 18 months later, in part down to COVID-19 and in part because of the expense of building a shared system.

Regardless of Ford’s and VW’s future fortunes, the battle lines that will shape the self-driving car industry for years to come are beginning to take shape. Now add Baidu to the mix. Last week China’s largest tech company announced that it’s self-driving hardware and software, dubbed the Apollo Computing Unit, is ready to take to market. The computing unit will debut in an autonomous parking product called Apollo Valet Parking, which is a joint venture with Chinese automaker WM Motor.

Given Baidu’s Alphabet-esque reach and scale, expect to see Apollo contend with the Waymo Driver for early market penetration and expect to see it soon. The pandemic may have felt like a groundhog day for the first half of 2020 but the second half is primed for a driverless renaissance.