Why Ford Focuses on Autonomous Driving for Commercial Vehicles?

Various signs indicate that Ford is reevaluating the application of autonomous driving technology in commercial vehicles. In the future, Ford may incorporate autonomous driving into its business scope, becoming a significant business segment.

On July 25th, Ford officially announced the establishment of its autonomous driving company, "Ford AV LLC," in Corktown, Detroit, USA. The company plans to launch autonomous commercial vehicles in 2021 to drive forward the commercialization of autonomous driving at Ford.

It's understood that Ford will fully integrate its existing autonomous driving business unit into the newly established autonomous driving automotive subsidiary. The company will focus on tasks related to autonomous driving system integration, research and development of autonomous driving vehicles, expansion of autonomous driving vehicle traffic service networks, user experience, and business strategy. Ford plans to invest at least $4 billion in supporting the development of its autonomous driving business by the end of 2023.

"Ford's entry point for autonomous driving is primarily in commercial vehicles, which reflects deeper strategic considerations," according to automotive pundits. Currently, commercial vehicles have the strongest demand for autonomous driving, and implementing autonomous driving on commercial vehicles is less challenging than on passenger cars.

The demand for autonomous driving in commercial vehicles primarily arises from two aspects: the need for driving safety and the enhancement of economic efficiency. Historically, labor in the commercial vehicle sector has been intensive, leading to safety hazards such as driver fatigue-induced errors and high-speed accidents. This also results in rising transportation costs.

Statistics show that over 50% of the costs in the long-haul transportation industry are spent on labor. Finding ways to improve transportation efficiency while ensuring safety has long been a challenge for both suppliers and consumers in the commercial vehicle market. Currently, reducing or even replacing manual labor has become a new trend in the transportation industry, and autonomous driving perfectly meets this demand in the commercial vehicle market.

Compared to passenger cars, commercial vehicles only need to consider the driving safety of the vehicle, with relatively weaker requirements for comfort and performance. Therefore, the technical threshold is lower for commercial vehicles, and the overall requirements for autonomous driving are also lower.

Additionally, the road environments used by commercial vehicles are relatively fixed and simple, with fewer situations similar to the open and complex road conditions faced by passenger cars. Therefore, commercial vehicles are more easily equipped with autonomous driving technology, even achieving higher levels of autonomy. The relatively simple driving environment and routes of commercial vehicles not only lower the threshold for autonomous driving but also facilitate the collection of driving data by commercial vehicle fleets, reducing development cycles and accelerating the implementation of autonomous driving for commercial vehicles and the maturity of intelligent driving technology.

"The commercial vehicle market is highly likely to become the first automotive segment to adopt autonomous driving in the future," industry insiders suggest. Ford clearly sees the enormous market potential for future autonomous driving applications in commercial vehicles, possibly becoming a supporting business for autonomous driving in commercial vehicles.

On June 19th, Volkswagen Group and Ford Motor Company jointly announced that they had signed a memorandum of understanding to seek cooperation in several areas, including the development of small commercial vehicles. The subsequent cooperation statement emphasized that it did not involve changes in equity structures, including cross-shareholding. In the field of commercial vehicles, both Ford and Volkswagen have strong and complementary advantages in multiple sub-markets.

According to relevant data, Volkswagen, as one of the world's largest automobile manufacturers, has already made significant strides in the commercial vehicle sector. By 2013, Volkswagen had acquired the majority of shares in Scania and MAN, making these two European veteran commercial vehicle companies its subsidiaries, thus establishing a dominant position in the European truck market with product ranges covering pickups, buses, and heavy trucks.

Ford's F-series pickup trucks have consistently been the best-selling American models in the medium-duty truck market. Moreover, Volkswagen primarily operates in China and Europe, while Ford's sales in North America account for 45% of its overall sales, so the two companies are expected to form regional complementary relationships through cooperation.

"Due to the diverse needs of different customers in the commercial vehicle sector, it's difficult to achieve economies of scale compared to passenger cars," some industry voices believe. For a long time, the commercial vehicle market has been dominated by regional brands, making it challenging for other brands to penetrate markets outside their strongholds. Hence, international and cross-regional cooperation is becoming increasingly active. Ford's collaboration with Volkswagen could facilitate mutual cooperation in the American and European markets.

Recently, with the establishment of "Ford AV LLC" in Corktown, Detroit, media reports have emerged about Ford's plans to acquire the historic Michigan Central Station, which has a history of 104 years. The station ceased its railway passenger service in 1988. According to media reports, Ford intends to purchase the station as a central landmark for its campus.

A source close to Ford revealed that Ford will soon announce detailed plans on how to handle the station. Real estate and construction experts estimate that revitalizing Michigan Central Station could cost Ford at least $300 million.

Relevant data shows that Ford relocated 220 employees to Corktown last month, primarily from its autonomous driving and electric vehicle teams. They will work in a building located at 1907 Michigan Avenue. This 4180-square-meter building, originally called "The Factory," was converted from an old factory.

However, while Ford eagerly returns to Detroit and focuses on developing commercial vehicles, its net income for the second quarter decreased significantly by 48%, falling to $1.1 billion. Executives attribute the decline in earnings to lower sales in the Chinese market and a May fire at a US supplier, which impacted the production of Ford's popular F-series pickup trucks.

The financial report shows that Ford's total revenue for the second quarter decreased by 2% year-on-year to $38.9 billion, while its pretax profit decreased by 40% year-on-year to $1.7 billion. Insiders close to Ford stated that the company internally defined the second quarter of 2018 as an exceptionally challenging financial period.