What led to the recent Ford-Volkswagen alliance?


Dr Herbert Diess (CEO of Volkswagen AG) and Jim Hackett (CEO of Ford Motor Corp) declared via a Press Release that the two companies have officially signed a Memorandum of Understanding (MoU) that will work towards the joint development of commercial vans and medium-sized trucks that operate on innovative technologies, with mass production scheduled to begin around early 2022. Ford-Volkswag

The majority of the world looks at the alliance as a turning point in global mobility solutions and transportation, owing to the collision of financial juggernauts in order to beat rising RND costs.

In a recent report, HEV automotive manufacturer ‘Tesla’ disclosed their financial reports for the year 2017, which showed around 1.37 Billion USD in expenditure for research and development (RND). This is against its 93 Million$ RND cost for the year 2010 (year of inception). A dramatic 1,000% spike, which was bound to keep other automotive players out of the HEV arena. Former CEO of Tesla and present Director on the Board, Elon Musk, said that around 22% of the total RND costs were incurred during the development of their Lithium-Ion (LiOn) batteries, which are used to power the entire vehicle.

However, averting RND costs are proving to be the least of Ford’s worries!

With the growth of futuristic technologies such as Machine Learning (ML), Robotic Process Automation (RPA), Artificial Intelligence (AI) and Deep Neural Networks (DeepNLP), mobility solutions for private and public consumer markets began to alter. From a mere market cap of around 20 Million USD in 2010, the HEV-Autonomous sector is gearing up to hit the Trillion Dollar evaluation mark by 2020.

Furthermore, as some of the biggest players in the market (Nissan, Tesla and Mitsubishi) have tightened their grips over the HEV-Autonomous market noose, conventional transport solution providers have scrambled teams and resources to start their own RND into HEV-Autonomous technologies so as to grab their slice of the pie.

Ford Motor Corp might have been the pioneers in assembly-line manufacturing for public consumer markets in automobiles, but their market share has dropped considerably over the last decade. Even though a recent spike in sales has delivered relief to the vehicular giant, resulting in a 14% market share within the United States, this places Ford at the 5th position on the podium, with companies like Tesla, Nissan and Daimler-Chrysler inching closer.

In 2015, Mercedes-Benz launched their concept driverless luxury vehicle ‘F-105’ in Las Vegas, which boasted swivel seats that enabled the driver and front-seat passenger to sit face-to-face. And simultaneously, BMW revealed their ‘i3 EV’ that could self-park as well as scan a garage to look for empty parking spaces.

So to enter the HEV-Autonomous market, under the guidance of Hackett as the Smart Mobility Subsidiary Head, Ford Motor Corp purchased Californian based ride-sharing company ‘Chariot’ in 2016. Ford then expanded its reach by spreading Chariot’s services into other states in the United States. However, this turned out to be the company’s biggest venture failure, with the platform displaying abysmal returns (with an average of 3 – 5 users per day)! These numbers forced Ford to finally shut the doors on its Mobility project in 2019.

And the competition doesn’t end with its predecessors. Analysts have forecasted that Big Data players and technology leaders such as Google and Apple have gotten a head-start on their plans to launch driverless cars to dishevel the public and private automobile consumer market. This wouldn’t be unbelievable considering that one of the fulcrum points in advanced AI and Machine Learning tools is Data, and the technology players have hoarded and stored voluminous quantities of consumer related data over the years.

Marc Winterhoff, Senior Partner at Roland-Berger (a US-German Consultancy firm that works with the World’s leading automotive firms), had recently commented that the annual sales of autonomous and driverless cars is projected to increase by 750,000 units globally. He also stated that this surge will spell doom for major automobile legacies. He further went on to say that only firms like Honda, Chevrolet and Volkswagen are likely survive the fight for public market share, along with automobile companies providing premium services like BMW and Mercedes-Benz.

Another tremor within the industry is the famed ‘Hyperloop’, which is set to revolutionise long-distance travel. Andres De León, COO of Hyperloop Transportation Technologies, will be making an appearance at the World Mobility Show in Dubai, as he is set to divulge the latest developments building up to the first official test of the technology.

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