As Auto Industry Transforms, Ford and Volkswagen Consider an Alliance
Posted June 20, 2018 1:11 p.m. EDT
Traditional automakers have faced increasing pressure in recent years from changed driving habits, the swift development of technology and emerging rivals from Silicon Valley.
So to avoid being left behind, some are teaming up.
Volkswagen and Ford, two of the world’s biggest carmakers, have announced that they are exploring a strategic alliance, possibly joining forces for an array of projects like the development of vans.
“Markets and customer demand are changing at an incredible speed,” Thomas Sedran, Volkswagen’s head of strategy, said in a statement released Tuesday evening. “To adapt to the challenging environment, it is of utmost importance to gain flexibility through alliances.”
The deal does not involve any financial commitment from either company, for now. But it raises the specter of some form of a tie-up as the two companies face a series of issues. The announcement comes after BMW and Daimler, two longtime rival German automakers, said in March that they would merge their car-sharing businesses.
Traditional carmakers like Ford, Volkswagen and others are increasingly making investments in new technologies like autonomous and electric cars, as well as services like vehicle-sharing. But they risk being caught out as deep-pocketed tech giants and upstart businesses join the fray. Google’s parent company, Alphabet, has made major strides in driverless cars and has a stock market value many times that of Ford and Volkswagen, while Tesla, the electric carmaker, has a market capitalization greater than that of many old-line behemoths.
Commercial vehicles — a category that includes minibuses and vans — offer an opportunity. Ford noted in its most recent quarterly results that commercial vehicles, as well as larger trucks and utility vehicles like pickup trucks, were expected to make up almost 90 percent of the company’s portfolio in North America by 2020. Demand for new commercial vehicles is also growing in Europe, according to the European Automobile Manufacturers Association.
But automakers will have to balance growth in the market for vans against tightening emissions standards. Proposed targets from the European Commission, for example, sharply reduce the average allowed level of carbon emissions for cars and trucks in the region.
Ford has already been trying out hybrid vans in London. The vehicles can change settings based on their locations, switching to electric mode when in a low-emission area. They are being used by businesses as well as by the Metropolitan Police. In May, Ford said that it would also run tests in Valencia, Spain.
“We see evolving needs of customers globally, and those needs are in the areas of connected services and powertrain choices,” said Michael Baumann, a spokesman for Ford in Europe, referring to cars’ energy sources. Customers’ needs are “changing dramatically,” he added.
A partnership could give both companies the chance to take advantage of expected growth in demand for electric delivery vans, according to Peter Wells, a professor of business and sustainability at the Center for Automotive Industry Research at Cardiff University in Wales. Businesses like Ikea and DHL are already shifting to electric delivery vehicles, and others are expected to follow suit.
“It’s a massive market; it’s growing quickly,” Wells said. “It’s been almost entirely diesel, and many authorities are looking to exclude diesel.”
The partnership between Ford and Volkswagen is one of several undertaken by traditional carmakers. In addition to the alliance between Daimler and BMW, which along with Volkswagen’s Audi unit dominate the global market for luxury vehicles, Fiat Chrysler is working with Google on self-driving cars; General Motors has invested in Lyft; and Volvo has made chassis for Uber.
Volkswagen has been particularly active in aligning itself with other carmakers.
It agreed in April to work with Hino Motors, Toyota’s truck brand, to cooperate on self-driving trucks. Volkswagen already owned a stake in Navistar in North America and has said it would consider a takeover of the company. It also holds a stake in the Chinese truck maker Sinotruk. And Audi said on Wednesday that it would work with Hyundai to share technology and components for electric cars.