With "storms battering the global [car] industry", Ford(NYSE: F) and Volkswagen (Germany: VOW) "have significantly expanded" their global alliance, says Peter Campbell in the Financial Times. They have agreed to collaborate on electric vehicles and self-driving technology. The new venture will involve Volkswagen investing $2.6bn in Argo AI, the Ford-backed driverless technology start-up, in a deal that values the group at more than $7bn. Ford will also build a mass-produced electric vehicle in Europe using the German group's in-house development and manufacturing system for battery cars. The idea is to save money by avoiding duplicating investments.
A culture clash?
Ford and Volkswagen's "ambitious plans" to expand their alliance are already being "lauded", says Neil Winton for Forbes. However, there are also worries "that company culture might be a source of friction over the long term". Previous big car deals suggest that this factor is crucial. For example, Daimler's 1998 takeover of Chrysler "was described as a marriage made in heaven, but ended in 2007 after what were called cultural difficulties". Similarly, Opel and its Vauxhall sibling made "massive" losses with General Motors.
It's impossible to guarantee that any alliance will be successful, especially "in an era of rapid change", says Stephen Wilmot in The Wall Street Journal. However, the two companies have maximised their chances of success by agreeing not to exchange equity in each other, something that typically ends up becoming "a seemingly irresolvable source of tension" in many partnerships. They have also "carefully calibrated" the agreement, so that it "covers only specific areas of operation in which one side or the other needs a leg-up".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The tie-up may be "one of the biggest events in the [car] industry in modern times", says Gary Vasilash on Autoblog. By using Volkswagen's electric-vehicle platform the two companies are trying to create "a standard for an electric-vehicle architecture". Similarly, having Volkswagen use Ford's artificial intelligence (AI) system in their cars will generate more data, enabling the AI to become "smarter and better".
Let's not get carried away, say Antony Currie and Liam Proud for Breakingviews. It's true that autonomous vehicles "can potentially reduce congestion and traffic-related fatalities, improve carmakers' margins and more". But working out how to value these outfits "is a quest in itself", especially since "no one knows when autonomous driving will take off and how much revenue it will earn". Even Argo AI's boss, Bryan Salesky, admits that "it will probably take several years for carefully circumscribed operations to get under way in more than a few cities", while broad adoption "is for long in the future". This makes it "hard to justify" the implicit valuation of $7bn that this deal gives Argo AI.
-
10 vinyl records worth up to £10,000 - is one in your collection?News Vinyl is experiencing a resurgence and collectors will pay up to £10,000 for some albums - is it time to dust off your old records?
-
FCA: Banks are still short-changing savers
The latest FCA review finds that while public shaming has encouraged providers into offering better deals on savings, many of those with closed accounts are still being shortchanged.
-
Three stocks that will profit from electric-vehicle growth
Tips Professional investor Konrad Sippel of Solactive, index provider for the Electric Vehicle Charging Infrastructure ETF, picks three firms solving the electric-vehicle charging challenge.
-
Industrial metals: electric vehicles are driving a boom in prices
News The soaring popularity of electric vehicles is pushing up the price of the industrial metals that make up the batteries.
-
Tesla is starting to motor as profits roll in
News Sales at electric-car maker Tesla reached almost $12bn in the second quarter of 2021, nearly double the level of a year ago.
-
Will Tesla hit $3,000, or are you better off investing elsewhere?
Opinion One of the world’s most successful fund managers believes that Tesla’s share price will hit $3,000 by 2025. Saloni Sardana examines whether that's a realistic aim, or whether you should steer clear.
-
Think Tesla is a bubble? This might be the best way to bet on it bursting
Opinion The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. Shorting it is a dangerous game. But there are other ways to bet on the bubble bursting. John Stepek explains how.
-
China touts electric-car maker Nio as the next Tesla
News Shares in electric-car manufacturer Nio have rocketed over the past year. But can it keep motoring and live up to the hype? Matthew Partridge reports
-
The electric-car bubble could get an awful lot bigger from here
Opinion The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and lost – but bubbles get things done.
-
VW shares are ready to motor – here's how to play them
Features German carmaker VW is putting the emissions scandal behind it, says Matthew Partridge. Traders should go long.
