Investors’ patience for ‘robotaxi’ ventures is wearing as thin as it is for other cash-draining Silicon Valley moonshots.
By guest author Stephen Wilmot from the Wall Street Journal
Ford’s F 2.14%increase; green up pointing triangle
decision to reverse out of the driverless-taxi business shows a laudable focus on delivering tangible products—but also the company’s financial weakness relative to crosstown rival General Motors.
Alongside third-quarter results published late Wednesday, Ford said it was shutting down Argo, the automated-driving business it controls jointly with Volkswagen. The U.S. auto maker will take a write-down of USD 2.7 billion and recruit several hundred Argo employees to its own driver-assistance and software teams, where it sees nearer-term prospects for developing services that might actually make money.
Argo talked about going public only last year, amid fresh hopes that self-driving “robotaxis” might be on the cusp of commercialization. Since then, the mood has soured sharply. The initial public offering of Mobileye, which has robotaxi plans as well as an established business selling driver-assistance software, took place this week at a far lower valuation than its owner Intel had hoped last December. Driverless-vehicle startups that went public during the pandemic tech-stock frenzy, such as Aurora Innovation and TuSimple, are trading at fractions of their IPO prices.
Taking the driver out of cars is a financial race as much as a technological one: Competitors need to be happy to pour cash into a science project in the hope that it might one day work well enough to both persuade regulators that it is safe and be scaled up profitably. The bet has become less appealing as interest rates and recession fears have risen. While Ford and Volkswagen have given up, General Motors and Alphabet are sticking with their respective Cruise and Waymo businesses.
Cruise generated no revenue and cost GM half a billion dollars in the third quarter. Founder Kyle Vogt defended the business in the auto maker’s quarterly call with analysts Tuesday, arguing that it had “pulled ahead” of rivals that were “still stuck in the trough of disillusionment.” Perhaps this is true, but GM also has a good record of stepping back when others are optimistic, including when it got SoftBank to take a stake in Cruise back in 2018. If Ford had concluded 18 months ago that robotaxis weren’t going anywhere fast, it might have saved shareholders a lot of money.
Ford is known for making desirable products—perhaps more so than GM—and has attracted a lot of attention with its F-150 Lightning and Mustang Mach-E electric vehicles. But GM has been the financially stronger company in recent years, putting it in a better position to continue funding robotaxis through a less favorable market for early-stage technology.
Ford underlined its weakness with poor third-quarter results, though they didn’t come as a surprise after a warning last month. Profits were sapped by, among other things, $1 billion of extra costs. Part of the problem was inflation, but the company also said on a call with analysts Wednesday that its “inconsistent production schedule” created problems for suppliers that it agreed to compensate them for. Ford cut its full-year guidance for operating profit to the low end of the previous range, but even that relies on much going right this quarter.
By Chief Executive Jim Farley’s own admission, Ford needs to get a better grip over its global supply chain. When the basics aren’t quite right—on top of the need to invest tens of billions of dollars in EVs and prepare for a potential downturn—robotaxis become an obvious thing to park.