- Alphabet and Ford will create a joint venture to build self-driving vehicles using Google’s technology.
- The partnership makes sense for both sides. Alphabet is the undisputed leader in autonomous driving technology, and Ford is an established car maker.
- Alphabet can continue to develop autonomous driving technology, and deploy Uber-like fleets of self-driving cars on demand, while relying on Ford for manufacturing.
Alphabet Inc-A (NASDAQ:GOOGL), the holding parent company of Google, and Ford Motor (NYSE:F) will create a joint venture to build self-driving vehicles with Google’s technology, a huge step by both companies toward a new business of automated ride sharing, according to credible rumors first reported by Yahoo Auto. The partnership is to be announced by Ford at the Consumer Electronics Show (CES) in January.
Recently Ford has announced that it is joining the race to developing self-driving cars. Ford is officially enrolled in the California Autonomous Vehicle Tester Program to test autonomous vehicles on public roads. Google's self-driving cars unit is scheduled to become a stand-alone business under the Alphabet corporate umbrella next year. A person briefed on the Alphabet’s strategy, who asked not to be identified, said that the new Alphabet company will offer rides for hire, with a business model similar to that of Uber and Lyft.
There are several links in place between Alphabet and Ford, whose former CEO Alan Mulally joined Google’s board last year. The head of the self-driving car project, John Krafcik, worked for 14 years at Ford. "This is a great opportunity to help Google develop the enormous potential of self-driving cars," said Krafcik when he was hired to lead Alphabet's self-driving car project. "This technology can save thousands of lives, give millions of people greater mobility and free us from a lot of the things we find frustrating about driving today."
The partnership seems to make a lot of sense for both sides. Alphabet is the undisputed leader in advanced software for self-driving cars, including sophisticated Artificial Intelligence (AI) subsystems for autonomous driving, computer vision, and navigation. At the same time, the company is not a car maker and might prefer to work with an established industry player with the required expertise and infrastructure in place. Earlier this year, Alphabet co-founder Sergey Brin said the company was looking for manufacturing partners that would use the company’s self-driving system.
Waiting for more information on the partnership to be released at CES in Las Vegas (January 6-9), analysts speculate that the joint venture would be legally separated from Ford, and non-exclusive. In fact, Alphabet has been talking to several other automakers for some time about using its self-driving systems. In January, Chris Urmson, then director of Self-Driving Cars for Google, said that the company's goal is to have driverless cars available on the market within five years.
Umson met with Ford and other automakers including General Motors, Toyota, Volkswagen and Daimler because Google was interested in working with conventional automakers who have expertise in engineering and building cars. “For us to jump in and say we can do this better, that’s arrogant,” Umson said in Detroit, USA Today reports.
The autonomous car sector is becoming crowded, with the participation of more and more traditional car makers besides Ford, including Toyota Motor Corp (NYSE:TM), Daimler, and Hyundai, as well as innovative Silicon Valley companies such asApple (NASDAQ:AAPL) with its secret self-driving car project, and Tesla (NASDAQ:TSLA) with its accelerating development of luxury all-electric autonomous cars. All these companies predict commercial self-driving cars on the roads by the end of the decade.
Alphabet wants to lead the development of software and subsystems for autonomous cars, and improve on Uber's very successful business model by deploying fleets of self-driving cars on demand - Uber without drivers - to pick up users in minutes at the tap of a phone app. But Alphabet could achieve these goals without becoming a car maker, by working with one (or more) of the car makers above.
It's easy to predict that the first car maker to establish a preferential partnership with Alphabet could become the leading autonomous car manufacturer, and continue to rely on Alphabet as both technology provider and anchor client. With this first partnership, Ford appears to be in a good position, and the impact on its stock is likely to be positive.