The evolution of traditional automakers into mobility companies continues at a pace faster than originally thought. Late last week, Ford became the latest to make a big splash by investing $1 billion in a tech start-up, reflecting its commitment to autonomous vehicles and attempts to catch up to others in the space, particularly Google and Tesla.
Ford’s purchase of Argo AI, an artificial intelligence start-up that focuses on autonomous car technology, shouldn’t come as too much of a surprise given that the automaker has voiced its ambitions to accelerate its self-driving program.
“If we can combine the best of a start-up and marry that with proper equity compensation, then that’s the best of both worlds.”
The start-up, which will be a subsidiary of Ford, is particularly appealing because of its top-tier talent, which includes engineers from Google and Uber.
“If we can combine the best of a start-up and marry that with proper equity compensation, then that’s the best of both worlds,” Mark Fields, president and chief executive of Ford, said Friday in San Francisco.
The purchase is an encouraging sign for Ford, reinforcing its commitment to its pledge made last year to have autonomous cars commercially available by 2021. But it also reflects how it’s been lagging others in this area, most notably the so-called disruptors, which include Tesla, Google, and Uber. More importantly, Ford had to shell out a huge sum—$1 billion is an eye-opening amount for this deal—in order to gain access to top talent in autonomous technology, as it realizes it doesn’t have sufficient personnel to transition to becoming a mobility provider.
Ford’s announcement on Friday comes on the heels of other major deals. Besides developing a connection with Silicon Valley, Ford has also delved into the world of ride-sharing, which it expects to complement its autonomous vehicle technology when it becomes commercial. The automaker recently bought Chariot, a start-up that shuttles commuters in the San Francisco area and is poised to spread to other cities this year. Ford has invested in Civil Maps, which will be used as a mapping service in the company’s autonomous cars.
There’s a lot of upside for being a “mobility” company. Ford said last year that mobility opportunities could fetch profit margins of 20 percent, versus 8 percent for the core business of selling cars and trucks
The other big U.S. automakers have also moved into the mobility and autonomy space. GM, for instance, partnered with Lyft early last year, while Chrysler has teamed up with Waymo, Google’s autonomous car division, to produce a fleet of self-driving mini-vans. Besides buying a stake in Lyft, GM also acquired Cruise Automation for access to autonomous technology. Ford’s investment in Argo AI can be seen as its answer to that move by GM.
A mobility company, not just an automaker
Ford’s purchase of Argo AI is, of course, another sign that transportation and mobility will see massive overhauls in the coming years, and that the company must keep up with technological changes in order to keep moving in that direction. Besides being aggressive in partnering with other companies, it is also seeking to shore up its credibility among the public in the autonomous space. In its Super Bowl ad, with Nina Simone’s “I Wish I Knew How It Would Feel to Be Free” playing throughout the commercial, the company highlighted how cutting-edge technology and efficient design in its vehicles will improve the quality of life for those who use it—with a particularly emphasis on electrification, ridesharing, and autonomy. This is in stark contrast to traditional ads from Ford and other automakers trying to sell their latest models.
“Driverless cars are looking better and better: They won’t text with each other, or get angry. They won’t play Grand Theft Auto in their off-hours. And they won’t cut you off just for the hell of it.”
Although the American public is still skittish about self-driving vehicles, there’s a growing recognition—which Ford clearly understands—that they will spur favorable changes, such as greater fuel efficiency, increased access to transportation for the blind, disabled, and poor, and reduced congestion. The biggest positive will be a major reduction in traffic accidents and deaths on American roads. As Jake Pelini, writing in The Atlantic, says, “Driverless cars are looking better and better: They won’t text with each other, or get angry. They won’t play Grand Theft Auto in their off-hours. And they won’t cut you off just for the hell of it.”