Thursday, February 16, 2017

Ford to Invest $1 Billion in Artificial Intelligence Start-Up

One of America’s oldest car companies is looking to make a billion-dollar investment on autonomous vehicle technology, hoping that owning a car would not be needed anymore. For the next five years, Ford invested in an artificial intelligence start-up called Argo AI as their subordinate to focus mainly on developing these autonomous vehicles. Self-driving cars are something that companies are looking forward to developing in order to create a faster and cheaper way of daily transportation. With this investment, Ford looks forward to not just being able to manufacture cars, but also to provide a better “mobility service”, making it possible for people to get places without owning vehicles.
Many robotics and engineering professionals have come from big companies to work for Argo AI in creating this new technology. Seeing that autonomous cars is something the public has been looking forward too, companies like General Motors, Uber and Google are probably going to be competing against each other to make these vehicles part of an everyday lifestyle. Recently, General Motors made a rather large investment in this field, investing $500 million in Ubers main competition, Lyft. This poses a threat to Ford’s new investment. Ford hopes to increase revenue with this new venture, however this may be difficult given their competitors. Uber and Lyft have already posed a threat to cab companies around the country. Those living in large cities have opted out of owning cars due to the convenience of public transportation and these companies’ inexpensive forms of transportation. Additionally, General Motors is a very established and highly trusted company, which could cause less people to favor Ford when investing. Furthermore, Google has been on the forefront of technological developments, and it is no different when looking at cars. Google has invested large sums of money into this field. Because they have a head start on Ford in this field, Ford is less likely to develop as high quality of a product.

That being said, this is a questionable investment for Ford. While it is a smart decision for them as a company to advance in the technological side of things, this could also be a waste of money for them. They are not known as a company who creates the most up-to-date products as compared to companies such as: Kia, Tesla, Mercedes and Audi. They face a great amount of competition entering this line of investment. What would be a smart choice for Ford, would be to partner with another company, such as General Motors, to work together towards creating this technology. This way, they would not be in competition with another company, and they would have more funding towards this investment. This would allow them to be more likely to create a product that is on the same level as Google’s potentially will be. All in all, Ford should reassess their investment and consider new ways to become competitive in this industry.  

1 comment:

Kelly McNamara said...

I agree that this invest is very risky for Ford and that a partnership would most likely have been a safer and financially smarter move to make. I think that this invest is the company’s way of trying to adapt to the rapidly changing world of transportation.

Self-driving cars do seem to be the next step for transportation and are being talked a lot about in the industry. However, it is as though Ford is missing a lot of steps in the process by going from manufacturing cars to investing in the research for self-driving cars. Companies like Uber and Lyft have a better understanding of the online transportation service and the process of setting up an app and connecting users to cars/drivers. They have really been the forerunners in the massive change that has occurred in the industry and they understand what the population is looking for in their transportation. I think General Motors saw that and saw the potential in investing in Lyft, with all its knowledge and experience.

Ford may see more opportunity in a drastic shift from manufacturing regular cars to researching and developing autonomous cars and could feel very confident with their large investment in a highly acclaimed company, like Argo Al, but I agree that it does seem hasty and involves a large amount of risk. Also, the amount involved in the investment seems steep for Ford, although that does sound amount right for the amount that would be needed to invest in autonomous cars. Looking at Ford’s financial portfolio, I would not expect Ford to feel as though they would want to make such an investment, but car manufacturers are really feeling the pressure to do something to get ahead of the changes in the industry because they have already seen great falls in sales because of the services that companies like Uber and Lyft provide.

I think this investment could be make or break for Ford. It is very risky but one can understand that car manufacturers are eager to find any way they can to be profitable in the changing industry. I believe it could either way for Ford and that hopefully the investment will end up being a great move made by the company. I do not think that the general public nor Ford themselves will know if the investment was worth it for quite some time, since the development of autonomous cars is only beginning and has a long way to go. Till then, because of the investment, I think that Ford should completely devote themselves to this project because they have already invested so much into it.