Automakers find safety in numbers as cost, uncertainty of autonomous vehicles spur collaboration
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March 02, 2019 12:00 AM

Automakers exploring autonomous tech find safety in numbers

Michael Martinez
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    As autonomous vehicle development commands major attention and investment, virtually every automaker has chosen to partner with one or more rivals in a bid to share costs and hedge against the uncertain technology.

    Last week alone, Volkswagen Group reportedly was considering a $1.7 billion investment in Ford Motor Co.'s AV subsidiary, Argo AI, as the two companies broaden a global alliance, while BMW and Daimler agreed to jointly develop self-driving technology by the middle of next decade.

    That follows news last year that Honda would invest nearly $3 billion in Cruise, the AV arm of General Motors. Fiat Chrysler Automobiles is partnering with Waymo, and companies such as Volvo and Toyota have forged pacts with various startups, suppliers and mobility companies.

    There are incentives for automakers to announce such tie-ups sooner rather than later, when valuations and buy-in costs are likely to be lower. A looming recession — and pre-emptive restructurings by Ford and GM — could further spur deals.

    "Ford is one of the pioneers in autonomous, so that is why we are talking with them."
    Herbert Diess, CEO, Volkswagen

    "It's increasingly hard to justify the amount of money being spent on research and development if companies can't recover that in revenue in the near term," Sam Abuelsamid, senior analyst at Navigant Research, told Automotive News.

    "Combining efforts gives them the potential to share the costs and, even if the volumes are lower in the near term, they still have the opportunity to not lose as much money."

    Ford is in the midst of a $4 billion investment in autonomous technology through 2023. The automaker's mobility business, which includes AV investments, lost $674 million last year.

    Those losses are likely to continue this year as Ford prepares to launch a Level 4 AV to commercial buyers at scale in 2021.

    Autonomous teamwork

    Competition is giving way to collaboration as automakers pour billions into autonomous vehicle development. Here’s a look at some of the connections that automakers have formed. The company revenues reflect the most recently reported full fiscal or calendar year results.

    Argo AI
    • Ford $160 billion
    • VW $263 billion (2017)

    The two sides in January launched a global alliance that began with joint development of midsize pickups and commercial vans, but they also signed a memorandum of understanding to explore partnering on autonomous and electric vehicles.

    Cruise
    • GM $147 billion
    • Honda $138 billion (FY2018)

    Honda last year invested $2.75 billion in Cruise, GM’s autonomous vehicle operations, which included plans to develop and deploy a purpose-built self-driving vehicle.

    Luxury rival collaboration
    • Mercedes $190 billion
    • BMW $112 billion (2017) (BMW is involved in 2 groups)

    The automakers last week signed a memorandum of understanding to jointly develop the next generation of autonomous driving technology, which could be available by the middle of next decade. The two sides are open to adding partners to the venture.

    Waymo
    • Alphabet $137 billion
    • FCA $131 billion (FCA is involved in 2 groups)
    • JLR $34 billion

    Fiat Chrysler Automobiles agreed in 2018 to supply up to 62,000 Chrysler Pacifica Hybrid minivans to Waymo’s self-driving fleet. Late FCA CEO Sergio Marchionne said the relationship was “a lot deeper” than it appeared and that the two sides had started discussions to develop Level 4 fully self-driving cars to be available for some FCA premium vehicles by about 2023.

    Automaker-supplier partnership
    • FCA $131 billion (FCA is involved in 2 groups)
    • BMW $112 billion (2017) (BMW is involved in 2 groups)
    • Intel $71 billion
    • Continental $51 billion (est.)
    • Magna $41 billion
    • Aptiv $14 billion

    BMW formed a partnership with Intel and Mobileye in 2016, and FCA signed on the following year. Intel later bought Mobileye, and the group has added more suppliers as well, with the goal of creating a scalable autonomous vehicle platform.

    Uber allies
    • Uber $11 billion
    • Toyota $264 billion (FY2018)
    • Volvo $42 billion (FY2018)

    Toyota invested $500 million in Uber last year to jointly work on developing self-driving cars. Volvo made a deal with Uber in 2017 to supply the ride-hailing company with up to 24,000 self-driving vehicles.

    Bloomberg reported in February that Ford and Volkswagen were discussing a $4 billion valuation for Argo, while The Wall Street Journal reported last week that VW was willing to spend $600 million for an equity stake in the business in addition to a $1.1 billion capital investment for r&d.

    Ford spent $1 billion to acquire Argo AI shortly after the startup was founded in 2016.

    "Ford is one of the pioneers in autonomous, so that is why we are talking with them," VW CEO Herbert Diess said last week.

    Ford CEO Jim Hackett has said AV development is an "attractive area" to partner in because of the costs and importance to the future of the business.

    ‘More strength'

    The rush to partner on AV development also underscores the complexity of the technology. Essentially doubling the number of software engineers and coders at a company's disposal could help solve some of the most pressing issues, such as how self-driving systems can navigate in bad weather or on roads with no lane markings.

    "A lot of companies are struggling, especially to develop systems that are more robust and can work in a wider variety of environments," Abuelsamid said.

    In announcing the BMW-Daimler partnership, Michael Hafner, head of automated driving at Mercedes-Benz r&d, likened the task to climbing a mountain.

    "Taking the first few meters from the base station to the summit seems easy," Hafner said. "But the closer you come to the goal, the thinner the air around you becomes, the more strength is required for each further step, and the more complex become the challenges you have to resolve."

    Possibly because of the complexity, Abuelsamid said, self-driving systems will be difficult to differentiate, which makes it easier for automakers to share what would normally be considered proprietary.

    "Given that it might not be something that sets one brand apart — other than having or not having — it makes sense to combine efforts to develop these systems," he said. "We're going to see more of these kinds of partnerships coming in the next couple years."

    Bloomberg contributed to this report.

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