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Analysis-Ford, VW pops the automated-vehicle-bubble with Argo AI exit by Stocksak


Β© Stocksak. FILEPHOTO: A driverless vehicle operated by ArgoAI drives in Austin Texas, U.S.A. May 12, 2022. This handout picture shows the car. Argo AI/Handout via REUTERS THE IMAGE HAS BEEN SUPPLIED BY ANOTHER PARTY./File Photos/File Photograph

By Paul Lienert

DETROIT (Stocksak) – Ford Motor (NYSE πŸ™‚ Co. and Volkswagen AG (OTC πŸ™‚ are rewriting the road map to fully autonomous vehicles.

It was a seismic shift in the market when the two automakers came together to control Argo AI, a self driving startup.

Wednesday’s announcement from Pittsburgh-based Argo about being shut down and some employees moving to Ford/VW reflects the growing realization of automated vehicles may be closer to mass deployment than industry executives thought back in 2019.

Ford CFO John Lawler stated Wednesday that “it’s becoming very clear that profitable fully autonomous vehicles at scale remain a long way away.”

As Ford, General Motors Co (NYSE:) and other companies began to realize they would need to step up investment over a longer period of time, β€œit was never clear what the financial returns were going to be” on automated vehicles, Evangelos Simoudis, an investor, author and corporate adviser, told Stocksak on Wednesday.

Regarding Ford and Volkswagen (ETR:)’s exit from Argo AI, Simoudis said, β€œI expect we will see more of those decisions.”

The AV deployment timeline is getting longer – after an estimated $100 Billion cumulative investment by global automakers, suppliers – the once-inflated valuations for self-driving businesses have come crashing to Earth.

In 2019, VW’s initial investment into Argo was $2.6 billion. This included $1 billion in cash and $1.6 billion for VW’s European self driving unit. Argo was then absorbed. Ford also purchased Argo shares from VW for $500 million.

Ford had previously invested $1 billion in Argo when it purchased control of the company back in 2017. It wrote down $2.7 Billion in impairment charges Wednesday.

VW had previously partnered with at least two U.S.-based self driving startups before it bought Argo’s stake.

VW was reported to have considered a $13.7B investment in Waymo for a 10% share in 2018. This would have valued Waymo around $137 billion.

Wall Street had previously estimated Waymo’s worth at $175 billion-250 billion. PitchBook has just reported that the company’s latest valuation of $30.75billion was in May 2020.

Aurora’s market cap, which was publicized almost a year ago, is now $2.5 billion. This is down from a 52-week peak of more than $20 Billion.

VW’s July 2019 investment in Argo was announced. It walked away from a deal with Aurora. At that time, the Silicon Valley company was valued at $2.5billion and backed by Amazon.com Inc (NASDAQ).

Motional with Aptiv, a joint venture between Hyundai and the auto-driving startup Zoox, was eventually formed by Aptiv (NYSE:). Amazon purchased self-driving startup Zoox.

According to PitchBook, Argo’s most recent valuation was $7.25billion, but that was more then two years ago. The company fired 150 employees in July. It stated that it was revising its business plan.

PitchBook valued Cruise, which is a majority-owned subsidiary of General Motors, at $30 billion in January 2020. However, this value has likely declined since SoftBank, a key investor, transferred its stake back to GM earlier in 2019. GM is losing $2B a year on Cruise.

Mobileye Global went public this Wednesday, but only at a third the $50 billion it had hoped for in its IPO.

The company was purchased by Intel Corp (NASDAQ:) In 2017, the company’s market cap increased to more than $21billion. This is a reflection of its financial strength and reputation in assisted driving systems. Intel still holds the majority of its shares.

News Source and Credit

Stocksak Editorial

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