Ford and Volkswagen announced a worldwide partnership which aims at saving the two companies millions of dollars on development of pickup trucks, vans, and transit vehicles, and this is the beginning of working together on the future- self-driving and electric cars.

Under this alliance, both of these companies will design and produce cars for each other. In Europe, Volkswagen will begin to sell Ford-produced medium pickups and commercial vans by 2022. On the other hand, Volkswagen will develop a city-oriented van for Ford which will arrive at the consumer’s by 2023. Both these companies will enjoy the flexibility to brand and market their new vehicles in accordance with their own strategies.

This partnership is no merger and doesn’t involve either company taking an ownership stake in the other.

Herbert Diess, Volkswagen chief executive said that the commercial segment, since a long time, had been a weakness for their company, and this partnership will help them fill the gap. Jim Hackett, Ford chief executive said that this move might help them expand in the US and might also leave the automaker’s truck footprint in foreign markets such as South America, Europe, and Africa.

Over the longer term, both companies have acknowledged the potential benefits they will have when they work together on new automotive technologies. Some analysts’ expected that a formal agreement would be reached, but the companies said that they are yet to reach one in regards to the electric or self-driving cars.

On Tuesday, Hackett told reporters- “I would just confirm it is an attractive area. Both the AV and EV are big bills, or costs, for investment, for innovation. And both are really important to the future of both the companies’, so that is part of the incentive to find ways to cooperate.”

A partnership was in talks after the two companies confirmed that they had been discussing on working together on pickups and commercial cars.

Tuesday’s announcement reflected the culmination of such negotiations since both firms seek to transform their businesses. Ford is embarking on an $11 billion (approximately Rs. 78,300 crores) restructuring plan which is expected to lead to thousands of layoffs as well as the closure of some plants. Ford also said that it has intentions to stop selling the vast majority of their sedans in the United States since drivers flock to SUVs and crossovers. On the other hand, executives have said that they are “all in” on the new electric vehicle technology, and have plans to release their first EV since the Ford Focus Electric in 2020.

Volkswagen is ahead on electric cars and has aimed to electrify their entire lineup by 2030. As part of this push, the company has been busy developing a standardised, modular platform which would make it easier for them to build electric vehicles which vary in types.

As VW ramps up the production of these electric cars in Europe and Asia, it will also add capacity in Chattanooga, Tennessee, and it will hire another 1,000 workers for its existing plant there. The Chattanooga facility has been expected to begin producing electric cars by 2022.

Developing fully electric cars from scratch, in comparison to converting an existing model, involves steep costs. Tesla has managed to do so and has lived up to the challenge by selling luxury EVs and has made it a way of subsidising the cost of refining the mass-market electric car. Last week, General Motors also signaled that it would take the same approach and went on to announce that it would make Cadillac, the company’s premium brand, which would focus on the development of its electric development efforts.

Jeremy Acevedo, an industry analyst at Edmunds said- “The luxury segment is a natural coupling. Tax rebates and subvented leases have masked this to a certain degree, but it looks like the next big steps in the EV segment will come from the luxury set.

Volkswagen announced its manufacturing unit and it quickly won plaudits from President Donald Trump, who on Tuesday went on to call it “a big win” and “a job well done” by city and state leaders.

Trump has always been quick to dole out praise, as well as fire off criticism, in response to automakers’ plans, in between the perception that their business decisions might reflect on him handling the overall economy. Trump gushed over General Motors and Ford when they announced investing in creating US jobs. But when these companies sought to retool their global operations in order to meet a changing market, Trump has slammed them on social media.

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