Ford Invests In The Future


What's going on here?

Ford, the American car company, said on Friday that it will invest $1 billion over the next five years in Argo, a new driverless car company. (tweet this)

What does this mean?

Argo was founded by two engineers who previously worked on autonomous driving at Alphabet and Uber. Ford will own the majority of the company as part of the deal, but it will be run pretty much independently.

The huge investment in Argo marks a significant shift in strategy for Ford, which had previously focused on in-house efforts to develop self-driving technology. The shift in strategy is intended to help Ford achieve its aim of launching a commercial self-driving car by 2021, one of the most ambitious goals of any major automaker.

Why should I care?

The bigger picture: There’s an autonomous car “arms race” going on.

General Motors paid $1 billion to acquire driverless car startup Cruise last year. Meanwhile, Toyota has earmarked $1 billion to be invested in developing autonomous driving technology. Ford is taking a different route: funding its own “startup.” This setup will allow the new company, Argo, to offer equity stakes to its planned 200 new employees this year, providing it with a potentially valuable carrot with which to attract talent (i.e. the potential upside of  “startup” equity). The intellectual property they develop can then be partnered with Ford’s automotive experience and scale.

For the market: US sales may be a more immediate problem for the auto industry than the autonomous car revolution.

2016 was a record year for US auto sales as relatively low interest rates allowed people to cheaply borrow money to buy cars and a decent economy gave them the confidence to do so. But sales declined in January, even as dealerships resorted to providing more generous discounts in an effort to sell cars. It’s too early to tell if 2017 will mark a decline in auto sales versus previous years, but the year is off to a poor start.

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