VW is investing $2.6 billion in ArgoAI following a cash infusion from Ford, valuing the self-driving-car startup at more than $7 billion

ArgoAI CEO Bryan Salesky. Ford
  • Volkswagen on Friday announced a $US2.6 billion total investment in ArgoAI, a self-driving-vehicle startup founded in 2016 that had earlier attracted $US1 billion in funding from Ford.
  • VW’s investment is $US1 billion in cash, with the additional contribution of its $US1.6-billion, Munich-based Autonomous Intelligent Driving division.
  • ArgoAI would remain an independent company post-deal, which would allow it to seek additional investment from other partners.
  • Also on Friday, VW and Ford revealed additional details of their ongoing alliance, which commenced earlier this year. Ford will use a VW electric-vehicle platform to launch a new European EV by 2023.
  • Visit Business Insider’s homepage for more stories.

The race to fund promising self-driving-car startups is intensifying.

On Friday, Volkswagen announced that it would invest $US2.6 billion in the autonomous-driving tech startup ArgoAI. The stake consists of $US1 billion in cash plus the contribution of the VW Group’s $US1.6-billion Autonomous Intelligent Driving (AID) division, headquartered in Munich, Germany.

The deal would value ArgoAI at more than $US7 billion and transform AID into the startup’s European headquarters.

“Our agreement with Volkswagen positions us as a technology platform company, expands the potential geography for deployment and will further fuel our product development,” ArgoAI Bryan Salesky said in a blog post published Friday. “In fact, we’re the first self-driving company with definitive deployment plans in both the United States and Europe.”

He added: “We are excited to welcome the AID employees to Argo AI….With this move, our company will expand by 200 employees to reach a total of over 700.”

Read more:The CEO of Argo AI, a self-driving startup backed by Ford, reveals the one thing that is absolutely necessary for an autonomous-driving company to survive

ArgoAI formed in 2016 and, according to Salesky, planned to join with a major automaker from the beginning. It’s now joined with two. And the investments from VW and from Ford, which committed $US1 billion in 2017, don’t exclude other companies from funding ArgoAI’s growing platform.

Ford was ahead of the curve. “Bill Ford saw a lot of this before others did,” Salesky said of Ford’s chairman, a longtime advocate of new-mobility ideas, in a 2018 interview with Business Insider. “He knew it would be a game-changer.”

Ford and VW will hold equal stakes in ArgoAI as a result of the deal.

Since early 2019, Ford and VW have been establishing a collaborative alliance (but not a formal tie-up, like the Renault-Nissan-Mitsubishi alliance), so there’s clear logic in VW CEO Herbert Diess following Ford CEO Jim Hackett’s lead in making a bet on ArgoAI.

ArgoAI now has investment from the world’s biggest car maker

Herbert diess
VW CEO Herbert Diess. Michael Sohn / Associated Press

“It’s very capital-intensive,” Salesky said of bringing autonomous mobility to market. “It’s not just the self-driving-car tech. We’re talking about funding and deploying tens of thousands of vehicles. Going it alone without a car maker would be too hard. Ford has scale and a strong brand.”

And so does the VW Group, the world’s biggest automaker.

Read more:
An early Lyft backer has invested in self-driving cars, artificial intelligence, robotic farm equipment, and more. Here’s why he won’t touch scooter startups.

VW’s ArgoAI investment is a pure technology play, as the Pittsburgh startup – now operating in the Detroit area, Silicon Valley, Washington, DC, New Jersey, and Miami – was founded by Google and Uber veterans 2016 and is now focused on developing its robotics-based tech rather than bringing it to market. That task falls to partners who elect to use it in their vehicles.

Ford’s stated goal is to launch a fully self-driving vehicle by 2021. The No. 2 US car maker has been perceived as lagging behind Alphabet’s Waymo and General Motors-owned Cruise, the latter of which has scored investments from SoftBank’s Vision Fund and Honda, as well as institutional investors, taking its valuation to $US19 billion.

Prior to Friday’s ArgoAI-VW announcement, the startup’s value had been pegged at around $US4 billion, but the VW investment indicated that number was too low – and further indicates that a peer-group of well-funded autonomous companies has emerged to compete with each other as the incipient market takes shape.

Cruise intends to launch an autonomous ride-hailing service this year, and Waymo brought its service, dubbed “Waymo One,” to Arizona late in 2018. Tesla CEO Elon Musk has said that his company could produce a robo-taxi fleet by 2020.

Also on Friday, Ford and VW announced that they would expand their global alliance. Ford will use a VW electric- vehicle platform to launch a European EV by 2023 and continue their collaboration on delivery vans and pickup trucks.