By Christopher A. Sawyer
The Virtual Driver

(June 28, 2018) The announcement that Ford and VW were looking at opportunities in the commercial vehicle market came as a surprise. Prior to the announcement, there were no indications the two OEMs were talking, much less that they had identified an area of mutual interest.

The growing commercial vehicle segment is a natural. VW’s Crafter (pictured below) and Ford’s Transit are on roughly the same lifecycle, and it would be relatively easy to create a common vehicle that would meets the needs of both companies.

These relatively large, rear-drive cargo carriers would be jointly designed with Ford and its Dunton, England, technical center as the lead. From there it’s a relatively short step to placing Ford’s Transit Tourneo and Transit Connect on the same modular platform as the next-generation VW Multivan, Transporter and Caddy. It would be a ruggedized version of the third-generation of VW’s MQB structure, and slash costs for both companies through reduced risk and even greater economies of scale.

The big opportunity, however, is in pickups. The mid-size VW Amarok and the Ranger could be combined to create a new global mid-size that VW will sell in the U.S. as well as the rest of the world. Again, Ford — which has a long, successful history with pickups — takes the lead, and builds on the components and systems developed for the Transit and Crafter. VW could even create a luxury version for Audi to compete with Mercedes’ Nissan-based X-Class mid-size pickup.

This global mid-size pickup would not, I think, replace the Atlas-based Tanoak pickup in VW’s preliminary product plans, as that vehicle would provide both companies with a low investment cost “suburban duty” pickup that could help to improve its CAFE numbers, especially in hybrid form. Should Ford agree to an “F-100” off the Atlas, this gives VW the volume it needs to make the Tanoak profitable, and its Chattanooga, TN assembly plant humming. However, there are more potential synergies to be had.

Consulting firm IHS Markit says EV and plug-in hybrid electric vehicles combined will account for no more than 15% of sales in North American, Europe and China by 2025, though this could grow to 25% by 2030. This expectation of rapid growth suggests a combination of lower battery costs, increased incentives, and legislation will be necessary to convince buyers to purchase an EV. Yet VW insists 25% of its sales will be EVs by 2025, despite 207 electric (EV and plug-in hybrid) vehicles hitting the market by 2022. Competition will be brutal, and there is no guarantee that car buyers will make the switch, as shown by a sales rate of less than 3%.

Any potential excess capacity could be absorbed by Ford, who is in the midst of an $11 billion effort to add EVs to its portfolio, and speed its entry into the market. Ford has said it will have a flexible EV platform in production in less than five years, but that seems a bit of a stretch. It can do that at a reasonable cost by sharing VW’s modular EV platform, and using many of the same suppliers, which also reduces VW’s risk exposure and cost.

This also opens the door for Ford — which has basically exited the car market — and VW — which has the up!, Golf, Jetta and Passat — to share the MQB architecture, keeping both in the car market through lower risk and greater combined volume.

The sheer sums of money and manpower being thrown around in pursuit of New Mobility concepts, autonomy and electric vehicles is staggering. The cost of switching focus from providing high quality, cost-effective, efficient cars and trucks buyers want to buy to becoming the doyens of New Mobility and EVs will drive some automakers out of business. Ford’s recent moves do nothing to change that reality.

The Virtual Driver