VolksWagen Invest $2.6 Billion In Self-Driving Car Startup

As part of its alliance dealership with Ford, Volkswagen has reportedly invested a total of $2.6 billion worth of capital in a self-driving car startup barely two years after soaring up to the limelight

Of course, it is ‘Autonomous/Electric car season’, and it is only reasonable to see auto brands moving towards that direction, and as a matter of fact, the latest trend doesn’t exclude Volkswagen and it partner, Ford, as they have been investing heavily into the new venture.

Before the latest fundraising by Volks that fetch the startup close to $3 billion, the Pittsburgh-based Argo AI has reported soared to the limelight following a $1 billion seed-funding from Ford. Now as a result of the partnership of Ford and Volks, the startup as just won another seed-funding, although in this case will be used in propelling the ‘duo’s’ venture into autonomous and electric vehicles.

In addition, the deal is a validation of Argo’s tech and, by adding one more customer, the startup diversifies and gains some independence from Ford, its first investor, and customer. Argo is still a private company that VW and Ford have taken holdings in.

“Argo is now officially a technology platform company,” Argo CEO and co-founder Bryan Salesky said in a press conference Friday morning in New York.

What does the deal entail?

Let’s break down the huge amount that was initially stated. OK! So with the new deal between Volkswagen Group, Ford, and Argo AI; VW will commit to funding the startup with $1 billion in form of capital, while it will also purchase Argo AI shares from Ford for $500 million over three years. Ford on the other end will invest the remaining $600 million of its previously announced $1 billion cash commitment in Argo AI, which will hence belong to VolksWagen.

According to Techcrunch, VW will also be handing over Autonomous Intelligent Driving, the self-driving subsidiary that was launched just two years ago to develop autonomous vehicle technology for the Volkswagen Group. AID is valued at $1.6 billion.

In addition, the Munich-based AID team will become Argo’s European headquarters, a move that will expand its staff 40% to more than 700 employees.

“Our agreement with Volkswagen positions us as a technology platform company expands the potential
geography for deployment and will further fuel our product development,” Salesky wrote in a blog post detailing the announcement.

The deal raises Argo’s valuation to more than $7 billion. Despite the extra contribution of AID, Ford and VW Group will hold equal stakes in Argo. The remaining equity has been set aside for employees, the companies said Friday.

“This is a win-win situation,” Volkswagen CEO Dr. Herbert Diess said in the press conference. “The collaboration brings some of the smartest people in the field of autonomous driving. Together, software and hardware experts will work side by side to tackle the challenge of developing a safely deployable autonomous vehicle.”

The deal, which is expected to close in the first half of 2020, is still subject to the approval of regulators, Diess noted. Argo’s board will now be comprised of two VW seats, two Ford seats, and three Argo seats.

Argo AI is developing the virtual driver system and high-definition maps designed for Ford’s self-driving vehicles. Now, that expands to VW.

Another important part of the deal that is considered very vital is the fact that Argo will treat VW and Ford as separate customers, although there will be some collaboration in some other terms, which will require cost-sharing from both companies, Ford CEO Jim Hackett noted during a press conference. Breaking the details down, this means Volkswagen and Ford will independently integrate Argo AI’s self-driving systems into its own purpose-built vehicles.

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