There are two logical areas for the VW-Ford partnership to focus on (VWAGY, F)

Earlier this week, Ford and Volkswagen (VW) two of the world's largest automakers revealed a new agreement that will see them collaborate to build commercial vans and pickup trucks, according to CNBC.

Specifically, the deal which had been rumored since last November will see the firms share drivetrains and components for trucks and vans.The collaboration will begin in 2022, with the companies saying that their cooperation will deliver higher profit margins starting the following year.

The firms also made vague references to future collaborations on electric and autonomous vehicles, raising questions about the specifics.The only detail that VW and Ford shared on this front was that they agreed to "investigate" electric vehicle (EV) and autonomous vehicle (AV) work they could collaborate on. That said, there are two areas where we think make sense for the company to consolidate efforts:

The companies should share EV battery technology and production facilities to benefit from economies of scale around both engineering and production.Batteries are both the most critical piece of the EV puzzle and the most difficult one to produce. They're expensive to produce as is, mostly due to the price of raw materials like Cobalt, and their current performance isn't yet satisfactory many batteries lack the juice for a long journey, lasting only a few hours per charge. Sharing technologies could not only help the firms cut the cost of battery production but also potentially get an EV to market quicker.VW has already allocated 50 billion (about $57 billion) towards battery cell procurement through 2025. The fruits of this investment could be made available toFord via its new partner, as could whatever comes of Ford's $11 billion EV investment, of which a sizable chunk is likely allocated to batteries.If the firms can successfully share battery technologies they could get to market quicker, cheaper, and potentially with products superior to other automakers'.
Meanwhile, both companies would be wise to lead the charge on AV information and data sharing with each other and their respective partners, and perhaps the entire industry.Both companies have built extensive partnership networks for their autonomous cars, from which they'll gain valuable data in addition to business opportunities. VW is rumored to be in talks over a partnership with Waymo since last year.For its part, Ford, has been working with Walmart and crowdsourced delivery startup Postmates to trial self-driving deliveries in the Miami area since last November. If VW and Ford agreed to share AV information, Ford could, for instance, offer valuable insights to VW about how consumers react to autonomous delivery, or what time of day they prefer deliveries to take place.It should be noted, however, that the limits of such an effort would be contingent on what information Ford and VW are allowed to share, per their agreements with other partner companies.

There are two logical areas for the VW-Ford partnership to focus on (VWAGY, F)

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