Volkswagen closes its investment worth £2.07 billion in Argo AI

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Jun 2, 2020
  • Volkswagen AG closes its investment worth £2.07 billion in Argo AI.
  • VW to transfer its Autonomous Intelligent Driving unit to Argo AI.
  • The carmaker finalises its largest M&A investments in Chinese EV firms.

German car manufacturer, Volkswagen AG (ETR: VOW) said on Tuesday that it closed its investment worth £2.07 billion in Argo AI. Founded in 2016 by Peter Rander and Bryan Salesky, Argo is a Pittsburgh-based startup that focuses on self-driving technology.  

Volkswagen and Ford Motor (NYSE: F) took an initial interest in the startup in 2016. Expanding their investments over the years, the two companies now jointly control Argo AI.

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Shares of VW are currently about 3% up on Tuesday. At £120.77 per share, the automaker is roughly 20% down year to date in the stock market. Its ally, Ford Motor, on the other hand, has lost just under 40% in the stock market in 2020 so far. Learn more about how to choose winning stocks.

VW to transfer its autonomous unit to Argo AI

VW had originally announced plans of investing in Argo in July 2019. As per the agreement, Volkswagen will not be buying Ford’s £2.08 billion stake in the self-driving company. Ford is currently valued at £18.58 billion while VW is a much bigger company in terms of market capitalisation and is presently valued at £65.19 billion.

According to Salesky, the VW deal will see the German automaker transferring its Autonomous Intelligent Driving unit based in Munich to Argo AI that will expand its workforce to over 1,000 employees.

Volkswagen had revealed its multibillion-dollar alliance with the American multinational automaker, Ford Motor Company, in July last year. VW’s supervisory board gave its approval for several projects last week as part of its partnership with Ford.

Ford established a dedicated segment for research and development of self-driving vehicles in 2018 by the name of Ford Autonomous Vehicles LLC. The company pledged an investment of £3.19 billion in this segment by 2023. In a bid to share the cost of developing self-driving automobiles, the U.S car manufacturer has also been committed to finding external investors for the project.  

VW finalises its largest M&A investments in Chinese EV firms

Despite the novel challenges posed by the Coronavirus pandemic that has so far infected more than 183,500 people in Germany and caused over 8,500 deaths, and the ongoing emissions scandal that is weighing on its financial performance, VW is committed to mergers and acquisitions to expand its footprint in the global auto industry.

The German carmaker finalised its largest M&A investments in Chinese EV (electric vehicles) firms in the last week of May.

At the time of writing, Volkswagen has a price to earnings ratio of 6.49.

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