Why Volkswagen and Ford are Teaming Up

June 20, 2018, 6:08 PM UTC

Volkswagen AG and Ford announced on Tuesday that they will be looking into organizing a partnership that could include projects such as a joint development of commercial vehicles. The companies made sure to note that no equity or ownership arrangements would be made.

The two companies have positions in different commercial vehicle segments already, so this alliance could lead to strong performance in a competitive market. The industry has become more competitive lately due to changing driver habits and technology-savvy rivals.

“This potential alliance with the Volkswagen Group is another example of how we can become more fit as a business, while creating a winning global product portfolio and extending our capabilities,” said Jim Farley, Ford’s president of Global Markets.

This comes less than two months after the announcement that BMW and Daimler merged their untraditional operations. Many traditional automakers, including Volkswagen and Ford, are investing in new technologies like electric and self-driving cars along with Google’s parent company Alphabet and Tesla. But there is still money to be made in traditional business.

Ford estimates that by 2020, commercial vehicles will make up around 90 percent of their portfolio in North America. There is also growth in this sector to be capitalized on in Europe.

To contend with emissions standards in Europe, Ford is already testing hybrid vans that can go into electric mode at the flip of a switch when driving in low-emission zones.

Peter Wells, a professor of business and sustainability at the Center for Automotive Industry Research at Cardiff University in Wales told the New York Times that the partnership between Volkswagen and Ford could allow the companies to take advantage of growth in demand for electric delivery vans as many authorities look to exclude diesel.

In the commercial vehicle landscape, Volkswagen has aready agreed to a partnership with Toyota’s Hino Motors on self-driving trucks and owns stake in Navistar in North America and Sinotruk, a Chinese truck maker.