burst! The star unicorn company was exposed to close down, burning out tens of billions

Is autonomous driving on the verge of fading?

This week, the American auto giant Ford announced that it will officially shut down and disband Argo AI, a self-driving technology development project for cars!

Affected by the failure of investing in self-driving companies, Ford’s performance has also been dragged down the quagmire: a net loss of $827 million in the third quarter .

Auto Giant Announces: Divestment! Investing in complete failure

On October 26, local time, Ford Motor announced its third-quarter financial results. One of the biggest concerns was Ford’s announcement that its previous investment in autonomous driving company Argo AI had completely failed, and it had written asset impairments for a total of $2.7 billion previously invested.

Backed by Ford and Volkswagen, Argo AI was once valued at $10 billion

Argo AI, which was born in Pittsburgh in the United States in 2016, attracted a $1 billion investment from Ford Motor just one year after its establishment . In the following years, Ford increased the investment to $2.7 billion . Argo AI invested 2.6 billion US dollars, forming a pattern in which Ford and Volkswagen each own about 40% of Argo AI.

In 2020, the valuation of Argo AI once approached 10 billion US dollars, becoming the leader of the second echelon of international autonomous driving companies after Google Waymo, GM Cruise and Aurora. Since then, with the help of the Volkswagen Group, Argo AI has expanded to Europe and expanded its European business with Munich as its core. At that time, the R&D team of Argo AI exceeded 2,000 people, and it was trying to seek listing in 2021.

According to Ford and Volkswagen’s original plan, Argo AI, which focuses on L4 autonomous driving algorithms, will prioritize the creation of an autonomous taxi Robotaxi based on Volkswagen ID.Buzz. Argo AI has previously reached a cooperation agreement with Lyft, an American online car-hailing giant, to implement autonomous driving algorithms.

However, after the two major economies of the United States and Europe entered into a cycle of raising interest rates and tightening monetary policy one after another, self-driving companies that were once overvalued thanks to the flood of liquidity are falling one after another.

When Ford invested in Argo AI, it set a goal of mass production of driverless cars in 2021, and Argo AI itself set a time point of “delivering a mature autonomous driving system within four years” – and then “four years later.” It’s a four-year wait.

According to Detroit media reports, the divestment of Argo AI was led by Ford. Ford is not satisfied with the progress of the research and development of the autonomous driving algorithm and said that it “has not seen actual progress . ” “We are optimistic about the future of Level 4 advanced driver assistance systems, but profitable fully autonomous vehicles at scale are still a long way off,” Ford CEO Jim Farley said in an Oct. 26 announcement. We don’t necessarily have to create this technology ourselves.” Doug Field, CEO of Ford Motor’s electric vehicles and digital systems, even bluntly said that achieving L4 autonomous driving is comparable to landing on the moon.

Ford has previously made it clear that the future will focus on L2+ and L3 advanced driver assistance functions that can provide practical services to customers.

According to a report by Handelsblatt, after Ford decided to divest Argo AI, it had hoped to sell 40% of its shares to the Volkswagen Group. Argo AI for divestment. Volkswagen will announce its third-quarter financial results on October 28, and it is expected that Wolfsburg will also officially announce a $2.6 billion write-down of assets.

According to the interview of the 21st Century Business Herald reporter, the technical team of Argo AI was not psychologically prepared for the sudden joint withdrawal of the two shareholders. Although Argo AI announced about 120 layoffs in July this year, equivalent to 6% of the number of employees, Argo AI has not completely stopped recruiting new employees since then.

The 280 employees of Argo AI’s Munich-based German subsidiary, Argo AI GmbH, have received a letter of invitation from major shareholder Volkswagen Group, which is considering accepting Argo AI’s German subsidiary in its entirety and allowing employees to work in its software subsidiaries CARIAD and Volkswagen. Jobs were chosen between Moia, the mobility-sharing subsidiary in Hamburg. But Volkswagen’s software subsidiary CARIAD has a fairly modest reputation in the European tech industry, and most of the team at Argo AI’s German subsidiary is expected to find another way out.

In contrast, only a small part of the technical team at Argo AI’s Pittsburgh headquarters has received an offer from Ford Motor.

Since the remaining 20% ​​of Argo AI is held by founder Bryan Salesky and his team. Argo AI, which lacks the backing of other major shareholders, is almost certain to go bankrupt after the divestments of Ford and Volkswagen. According to internal estimates by Argo AI, the company still needs $400 million to $600 million in funding to support it through 2022, and Ford is unlikely to agree to another capital injection.

Unlike Ford, which has completely abandoned the Level 4 autonomous Robotaxi, the Volkswagen Group is currently insisting on launching a Robotaxi fleet in Hamburg in 2025 through its Moia subsidiary. Previously, the German subsidiary of Argo AI was the main technology provider for the project. VW has not announced who will be the replacement for Argo AI, but it is widely expected that Mobileye, Intel’s self-driving subsidiary that has just gone public, will become VW’s technology supplier.

The fall of Argo AI is not an isolated case

On September 3, Aurora, which once claimed to be one-third of the world with Google Waymo and GM Cruise, mentioned in a “leak” document that the company was considering selling to Microsoft or Apple as a whole to survive. Since its backdoor listing in May 2020, Aurora’s shares have fallen from $15 per share to $1.3 per share, a reduction of more than 90%. Today, Aurora’s market value is only about $2.5 billion, which is not as good as Ford and Volkswagen’s investment in Argo AI. half of the amount.

Mobileye, Intel’s autonomous driving subsidiary listed on October 26, also confirmed the indifference of the capital market to the autonomous driving industry. Although Mobileye did not have the embarrassing situation of breaking at the opening, the company’s valuation has shrunk to $17 billion from the previous $50 billion.

Ford’s third-quarter net loss of $827 million, down 145% year-on-year

On October 26, local time, Ford Motor (F.US) released its financial report for the third quarter of 2022.

In the third quarter of this year, Ford Motor’s operating income was 39.392 billion US dollars, a year-on-year increase of 10% . Among them, the automobile business revenue was 37.194 billion US dollars, a year-on-year increase of 12%, which was better than the market expectation of 36.9 billion US dollars.

In terms of profits, in the third quarter, Ford’s net loss reached $827 million, down 145% year -on-year . In the same period last year, Ford made a profit of $1.832 billion.

However, adjusted EBIT in the third quarter was $1.8 billion, down 40% year-on-year; the adjusted profit margin fell by nearly half to 4.6%.

Ford attributed the profit slump to parts shortages that hit production of 40,000 to 50,000 vehicles and an extra $1 billion in unexpected supplier costs in the third quarter.

In addition to the above factors, Ford admitted that the failed investment in Argo AI, a high-level autonomous driving company, was also an important factor in the loss in the third quarter.

The commercial landing of autonomous driving is far from the horizon, and it is difficult to continue the life of the industry during ebb

Autonomous driving is falling into an unprecedented trough, and even as a unicorn company, it cannot escape the fate of being “abandoned”.

According to the Economic Observer, the autonomous driving industry is undergoing an unprecedented reshuffle, and it is inevitable for established companies to ebb. Among them, there are many problems such as stock prices falling to 10%, large-scale recalls of vehicles, and stagnation of technological progress . As the capital market bubble dissipated, many of the once high-spirited self-driving unicorns have struggled on the brink of delisting.

It is understood that Crunchbase, an American enterprise service data company, has tracked 14 companies that have listed self-driving car-related technologies in recent years, and found that the average decline of these companies after listing is more than 80%.

The worst performers included self-driving truck developer Embark, LiDAR technology company Velodyne Lidar and Quanergy, all three of which fell more than 95% or more. What’s more, the stock price fell by more than 97% from the initial price within a year, and it was in deep crisis of delisting.

Under the ebb of the industry, it is clear at a glance who is swimming naked.

This also proves that most investors do not practice value investing and blindly bet on the future potential led by technology. What’s more . Once they lose the support of Jinshan, they can only enter the end of falling into the abyss. Argo AI is one of them, and today’s ending is also doomed. .

2015-2016 is the golden age of autonomous driving development. The capital market has unlimited imaginations for this “technology that changes human travel”, so it is willing to spend a lot of money on it.

Argo AI is still like this as a star listed company, and other companies are bound to endure a period of time in the cold winter of the industry.

Source: 21st Century Business Herald (Reporters: Qian Boyan, Zhang Mingyan, Du Qiaomei; Editor: He Fang), Economic Observer (Reporter: Zhang Qian)


Editor Jiang Peipei intern Luo Xinyu