Ford, VW pull plug on robotaxis in blow to self-driving car industry

Washington, DC(CNN) Ford and Volkswagen, two of the world's largest automakers, are shutting down their joint effort to develop self-driving cars, the startup Argo AI.

Ford said Wednesday that it had concluded that the large-scale profitable commercialization of self-driving cars was further out then expected.

The company is still "optimistic" about a future for fully self-driving cars, "but profitable, fully autonomous vehicles at scale are a long way off and we won't necessarily have to create that technology ourselves," Ford CEO Jim Farley said in a statement as part of the company's larger report on its third quarter earnings.

The automaker will instead focus on simpler driver-assist technologies that have proven easier to develop and bring to market. Some Argo AI employees will join Ford for that work, Farley said. Ford offers a driver-assist technology called BlueCruise that is positioned as a rival to Tesla's Autopilot software.

VW described similar plans in a statement.

"Our goal is to offer our customers the most powerful functions at the earliest possible time and to set up our development as cost-effectively as possible," VW CEO Oliver Blume said in a statement.

Argo AI confirmed in a statement that it would be shutting down.

"Many of the employees will receive an opportunity to continue work on automated driving technology with either Ford or Volkswagen, while employment for others will unfortunately come to an end," Argo AI said in a statement.

Argo was founded in 2016 and had fewer than 200 employees in 2017. It grew to more than 1,000 employees in 2020 following investments from Ford and VW, and to about 2,000 in 2022.

Ford and VW had first said in July 2019 that they would invest together in Argo AI. The company was developing robotaxis, self-driving vehicles that can operate in a ridehail service that does not require human drivers. Argo AI was also developing self-driving delivery vehicles and had worked on related programs in US cities.

The team effort allowed Ford and VW to share the hefty costs of developing self-driving cars.

Then-Ford CEO Jim Hackett said at the time that Argo AI would allow the company to "showcase the power of our global alliance in this era of smart vehicles for a smart world."

Argo AI CEO Bryan Salesky had spent three years working on Google's self-driving car program, now known as Waymo, which kicked off the industry in 2009. His co-founder Peter Rander had previously worked on Uber's now defunct self-driving car program.

Companies have found that developing self-driving cars is incredibly expensive. Ford said Wednesday that it would take a $2.7 billion loss on its investment in Argo AI, leading to a $827 million net loss for the third quarter.

General Motors' self-driving subsidiary Cruise has lost $1.4 billion in 2022, the automaker revealed Tuesday.

Even Alphabet's Waymo, the industry leader that's funded by Google's big profits, has taken on outside funding to ease the heavy costs.

Ford said Wednesday that Argo AI had been unable to attract new investors.