VW Group is investing $2.6 billion in capital and assets into Argo AI, the Pittsburgh-based autonomous vehicle startup that burst onto the scene two years ago with $1 billion in backing from Ford.
The deal, which has been rumored for months, is part of a broader alliance between VW Group and Ford that covers autonomous and electric vehicles.
The Argo piece of this tie-up involves more than just an injection of capital in return for a stake in the startup and board seats. It turns Argo into a global company, or at least one with operations in U.S. and Europe. And it instantly boosts its staff by 40%.
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 in which VW and Ford have taken holdings.
“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.
VW has committed $1 billion in capital to the startup and also will purchase Argo AI shares from Ford for $500 million over three years. Ford will invest the remaining $600 million of its previously announced $1 billion cash commitment in Argo AI.
VW is also 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.
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.
For the past two years, Argo AI has done much of its testing in Pittsburgh, where it’s based. The company is also testing its autonomous vehicle technology in Austin, Miami, Palo Alto, Washington, D.C. and Dearborn, Mich. It recently expanded testing to Detroit, specifically Corktown and sections of downtown around Campus Martius Park.
Argo will treat VW and Ford as separate customers, although there will be some collaboration, which will help both companies share costs, Ford CEO Jim Hackett noted during the press conference.
This means Volkswagen and Ford will independently integrate Argo AI’s self-driving systems into its own purpose-built vehicles. Argo AI’s focus remains on delivering a SAE Level 4-capable SDS to be applied for ridesharing and goods delivery services in dense urban areas.