When the news broke yesterday that Ford-backed self-driving startup Argo AI would be closing its doors, it was a major shock. That’s partly because it felt so sudden but also because, at the time, we had no information on exactly why that decision had been made. However, after Ford’s Q3 earnings call, we have a much better understanding of the automaker’s thinking.
As Endgaget reports, it basically comes down to the belief that reaching Level 4 autonomy will cost too much to be worth continued investment. “It’s estimated that more than a hundred billion has been invested in the promise of level four autonomy. And yet no one has defined a profitable business model at scale,” Ford CEO Jim Farley told investors.
Doug Field, Ford’s head of advanced product development and technology, also spoke on the call, explaining that Ford plans to refocus its efforts on Level 2 and Level 3 driver assistance systems, such as it own BlueCruise. He also believes bringing all operations in-house will help the team work more efficiently:
Commercialization of L4 autonomy, at scale, is going to take much longer than we previously expected. L2+ and L3 driver assist technologies have a larger addressable customer base, which will allow it to scale more quickly, and profitability.
It’s taking that investment and putting it towards a business where we think we will have a sizable return in the near term relative to one that’s going to have a long arc.
We will have a core team that can integrate a system, understand its performance at the system level. And we will own the software. It is really important that we also own the connection to these vehicles. L3 is a connected technology, so the ability to have a pipeline that collects data and makes the system better and better — we must own that.
That doesn’t mean Ford believes Level 4 automation is impossible to achieve. It’s more that the business case isn’t there at the moment, and it seems unlikely that a major breakthrough is just around the corner. “We don’t expect a single ‘Aha!’ moment like we used to,” Farley said.
As we previously reported, the decision to shut down Argo AI didn’t come cheap for Ford. The automaker reportedly “recorded a $2.7 billion noncash, pretax impairment on its investment in Argo AI, resulting in an $827 million net loss for the third quarter.” That’s, uh, a lot of money.
But it does help put things in perspective. If Ford was willing to take a $2.7 billion loss on Argo, how much more would it have cost to continue chasing Level 4 autonomy? Whatever Ford’s accountants thought that number was, it had to have been absolutely staggering.