New York - Ford and Volkswagen have expanded their partnership to include electric vehicle production and driverless car technology.
The deal includes a plan for Ford to use VW's MEB electric car platform to build battery-powered cars for the European market.
Ford hopes to sell 600 000 vehicles in Europe using VW's technology over six years starting in 2023. VW has already invested $7 billion (R97bn) in its new platform, which it plans to use to build 15 million electric vehicles worldwide in the next decade.
"Ford has taken flack for years for not having a robust EV strategy and VW has had its own fair share of challenges, but this can help both companies reinvent themselves as innovative technology leaders," said Jessica Caldwell, executive director industry insights for Edmunds.com.
As for Ford and Volkswagen, Hackett and VW CEO Herbert Diess left the door open to more collaboration between the companies, but they did not say whether there were specific additional partnerships in the works. Another already announced collaboration will see Volkswagen using Ford's Ranger platform for a replacement for the Amarok.
Driverless cars coming in 2021
Furthermore, Volkswagen will invest $2.6 billion to become an equal owner of Pittsburgh-based autonomous vehicle company Argo AI, which was mostly owned by Ford. This forms part of their plan to put autonomous vehicles on the roads in the US and Europe as early as 2021.
Car companies have been teaming up with each other as well as with big technology firms over the past few years to try to spread out the enormous costs of developing self-driving and electric vehicles. Ford CEO Jim Hackett expects the large crowd of players to be narrowed down.
"The stakes are high here," Hackett said at a news conference Friday. "There's only going to be a few winners who create the leading platforms for the future. We cannot be late, Ford can't be late, and we have to be great."
The decision to team up helps Ford and Volkswagen share the steep costs - and risks - of developing technology for driverless vehicles, and gives Argo AI more cash to attract talented engineers, crucial to success. It also will help the automakers pivot from cars that compete on engine performance to those where the unique characteristics of the driver experience will be driven by software.
"The auto industry, in the past we've been criticized for a lack of interest in working together, and what you're seeing with Volkswagen and Ford is a commitment to doing that on a number of projects," said Joe Hinrichs, president of automotive for Ford.
What it comes down to for both the car and technology companies is time and money. Driverless cars may not become commercially viable or generate revenue for years. There are also enormous up-front costs to change plants to produce electric vehicles.
Industry experts say partnerships like the one between Ford and VW will become more common.
"One company cannot bankroll the development alone," said Akshay Anand, executive analyst for Kelley Blue Book. "Partnerships will continue to ramp up in coming years, crossing boundaries most would not have envisioned even 10 years ago."
With electric vehicles, manufacturers are under pressure to release zero-emission cars in markets such as China and Europe to meet tougher pollution limits. Ford already has its own platform which it will continue to use for the majority of its electric vehicles, but the relationship with Volkswagen will help Ford to develop smaller electric vehicles that are desired in the European market.