Berlin, Albuquerque, Dusseldorf The end of Argo AI was sealed on Wednesday evening. Volkswagen and Ford have announced that they are giving up their joint involvement in the robotaxi start-up. A company valued at billions disappears into thin air overnight.
The US automaker announced the exit to present the quarterly figures on Wednesday. Ford boss Jim Farley justified the decision with the long development of autonomous driving with no prospect of profits with which expenses could be financed. “Several billions in investments would have been necessary,” said Farley when presenting the Ford figures.
According to CFO John Lawler, Ford would have had to invest at least five more years before the first income would have become realistic. According to chief technology officer Doug Field, developing a robotic taxi that can drive itself through city traffic is more difficult than putting a human on the moon.
VW boss Oliver Blume said on Wednesday evening about the withdrawal from Argo: “Focus and speed count, especially when developing future technologies. Our goal is to offer our customers the most powerful functions at the earliest possible point in time and to make our development as cost-efficient as possible.”
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The US automaker has to write off its investment in Argo AI and is $ 2.7 billion in the sand. That broke Ford a quarterly loss of over 800 million euros. Volkswagen is withdrawing from the start-up after only two years. In 2020, VW had invested around $2.6 billion in Argo AI. It is unclear how much of this sum will be resolved. VW will present its quarterly figures on Friday.
While the departure of Argo AI means a loss on the balance sheet for Volkswagen and Ford, it could have even more serious consequences for the robotaxi industry. “From our point of view, this shows how difficult the development of real autonomous driving is,” writes Bernstein analyst Daniel Röska. Investor Evangelios Simoudis told Reuters with regard to Argo AI that he expects further decisions of this kind in the robotaxi industry.
Until recently, companies and investors scrambled for start-ups such as Cruise, Aurora, Mobileye, Zoox and Waymo. However, due to rising interest rates worldwide and weaker economic forecasts coupled with the realization that the technology is probably still a decade away from being ready for series production, tech optimism seems to be shattered by reality. The multi-billion dollar start-ups are losing value. In the automated driving scene, such development phases are referred to as “winter”.
US start-up Aurora is for sale
The Intel subsidiary Mobileye, which celebrated its stock market debut on Wednesday, was able to increase more than 36 percent on the first day of trading. However, the stock market value of $23 billion is more than half below the initially targeted $50 billion.
GM subsidiary Cruise, which currently offers robotic taxis in San Francisco, was once valued at around $30 billion, now only comes to $19 billion. The Japanese technology fund Softbank recently sold its shares back to GM for $2.1 billion. GM loses around $2 billion a year with its Robotaxi subsidiary.
>> Read here: Volkswagen and Ford abandon a billion-dollar project for autonomous driving – employees appalled
The US company Aurora, on the other hand, is only worth 2.5 billion dollars. At its best, it was once more than 20 billion dollars. The need at Aurora is great. Boss Chris Urmson has already recruited the workforce to cut costs, and even a sale is in the pipeline. Apple and Microsoft would be possible. So far, however, neither company has taken action.
The fact that Argo has apparently recently been unable to attract other investors besides Ford and Volkswagen also speaks in favor of a cooling off of the market. That should also have been a reason for Ford to get out, according to industry circles.
Many Argo employees in the USA and Germany reacted in astonishment to shock at the news on Wednesday. “There have been savings over the past few months. But we hired new colleagues last week. Nobody here expected an end,” an insider told Handelsblatt.
VW has already made a takeover offer to the more than 280 employees of the German subsidiary, Argo GmbH. “We are pleased to be able to inform you that your employment relationship will not be interrupted,” says an internal memo available to the Handelsblatt. The 2022 bonus will also be paid out in full. “Volkswagen is planning to take over Argo AI GmbH.” Volkswagen will therefore probably not have to write off the entire investment sum of 2.6 billion euros.
Mobileye is likely to become a new VW partner
On Thursday at 10 a.m., the Argo employees should receive further details as part of a virtual conference. Still, the mood is bad. German Argo employees could be used, among other things, in the Hamburg Robotaxi project or switch to Cariad.
But the Volkswagen software subsidiary is considered second-rate by the Munich Argo team, which includes many well-trained IT experts. “We all hoped to remain independent. A lot of good people will leave the company,” said one voice.
Not much will change for VW after the Argo exit. Cariad is already developing automated driving functions, such as motorway assistants, in cooperation with Bosch. VW intends to present a new partner shortly for its robotic taxis previously planned with Argo, which are still to be launched via the mobility subsidiary Moia in Hamburg in 2025.
>> Read here: Volkswagen launches real robotaxi offer in Hamburg
The company has not yet announced the name of the future partner. In corporate circles, the Intel subsidiary Mobileye is traded as a favorite. In early October, VW CEO Oliver Blume said in an interview with the Handelsblatt that “we are currently in good talks with one of the world’s most renowned suppliers.” Mobileye is one of the leading companies in the development of autonomous driving systems.
Unlike Volkswagen, Ford is making a strategic turn. In the future, the US carmaker will focus on automated driving functions, such as a highway assistant. According to Ford boss Farley, there would also be potential sources of income in the short term.
Bernstein analyst Röska assumes that this model could set a precedent for car manufacturers. “In the end, it could be a better option for car manufacturers to develop individual customer functions such as a highway assistant themselves or to buy such systems from suppliers instead of pouring more and more money into a black hole,” writes Röska.
More: Why VW, Daimler and BMW are more successful in automated driving than the tech companies