The staggering cost of self-driving cars is behind Ford and Volkswagen’s new partnership

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Car companies are struggling go it alone in the autonomous age. As the costs and experience needed to develop self-driving vehicles come into focus, automakers are teaming up to spread the expense. The latest is Volkswagen’s partnership with Ford to invest $7 billion in Argo AI, a startup working on developing autonomous cars.

The carmakers announced today (July 11) they will jointly own Argo while independently integrating its self-driving system into their vehicles. “While Ford and Volkswagen remain independent and fiercely competitive in the marketplace, teaming up and working with Argo AI on this important technology allows us to deliver unmatched capability, scale and geographic reach,” Ford CEO Jim Hackett said in a statement.

That will allegedly give the newly owned Argo the largest geographic deployment of autonomous technology in the industry because of their access to global car markets, the companies said in a release shared with Quartz. It also hands both automakers desperately needed expertise, and scarce talent, in the self-driving space, especially where Alphabet’s Waymo, Tesla, and General Motors’ Cruise are already well established.

Argo, founded in 2016, designs “level 4” autonomous systems capable of driving under most conditions without a driver (full self-driving, or what’s called level 5, remains out of reach). The company says it’s focused on serving the market for ride-sharing and deliveries in urban environments. It started testing its technology in Miami in early 2018, but rapidly expanded to other cities.

Ford, which invested $1 billion into Argo just four months after it was founded, will commit more cash and sell part of its existing stake to VW. The German automaker is merging its $1.6 billion self-driving unit with the jointly-owned company, giving it 200 new employees, and creating Argo’s European headquarters.

Today’s announcement strengthens the pact Ford and VW made in January, when the automakers said they would jointly develop commercial vans and midsize pickup trucks, and explore how to develop electric and self-driving technology together. This alliance is designed to reduce costs for both companies, without formally tying either company into something more drastic, like merging.

Expect more of these types of deals in the near future. “Electrification and automation will take limitless amounts of money in the coming decades,” David Keith, a professor at MIT’s Sloan School of Management previously told Quartz. Last fall, Honda bought a stake in GM’s Cruise Automation. As the traditional gasoline car industry is undone by electrification, autonomy and shared transport, everyone is now scrambling for pole position.

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