Automakers exploring autonomous tech find safety in numbers

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.

"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.

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.

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.