For years, Ford Motor (NYSE:F) has been searching for a technology partner that could help it produce self-driving cars. CEO Jim Hackett got his job in 2017 due, in part, to his connections with technology companies and his promises to make deals that would enable Ford to enter autonomous driving, as well as the board’s belief that his initiatives would boost Ford stock.
Hackett has found a technology partner, but Donald Trump won’t be happy about the deal. Ford’s new partner is Chinese internet search engine provider Baidu (NASDAQ:BIDU), which dubbed its self-driving system “Project Apollo.” Ford China will test a self-driving system created by Baidu on Chinese roads starting later this year.
For Ford, it’s a delicate dance of finance and technology.
Ford’s Chinese Partner
Baidu has invested heavily in Silicon Valley, and Project Apollo, now on Version 3.0, calls itself an “open platform” that could enable autonomous driving on highways and city roads as early as 2021. Ford is choosing to partner with Baidu instead of partnering with one of the multiple U.S. tech companies in the space, as Ford sees Baidu as a cheap way to enter the autonomous vehicle market. Its Ford China unit can piggyback on Baidu’s efforts, to see what works and what it may adapt elsewhere.
Baidu CEO Robin Li has been spinning off units to focus on artificial intelligence projects like self-driving cars. Baidu has spun off Du Xiaoman Financial in fintech retaining a 42% stake. It spun-out Zuoyubang in education — and Softbank (OTCMKTS:SFTBF) is putting $500 million into it — and it spun off iQiyi (NASDAQ:IQ), which I wrote about here.
Li talks of the internet being the appetizer of twenty-first-century change, and artificial intelligence the main course. While Tesla’s (NASDAQ:TSLA) Elon Musk fears AI running amok and destroying jobs, Li insists there are “more opportunities than threats.”
Ford is one of those opportunities. But it’s also a political minefield.
The risk in Ford’s Baidu dance is the Trump trade war, which paints China, its current technology partner, as a villain. Ford might like to play off Chinese technology against American options, but politics may give it no choice.
For autonomous driving to take off, the technologists and manufacturers must get together, and politicians must accept the results. Consequently, the Baidu deal creates political risk for Ford stock. But if Ford is forced to move toward an American partner, there are still companies it can dance with.
Bottom Line on Ford Stock
While General Motors (NYSE:GM) is developing its own technology for self-driving cars, claiming it doesn’t need a technology partner, Ford does. With Big Tech companies on the M&A prowl, Ford could find its autonomous car technology bolstered by a big brother.
Consider Alphabet’s (NASDAQ:GOOGL) Waymo, which developed its technology almost a decade ago. To strengthen Waymo’s self-driving taxi service, the company is buying 62,000 Chrysler Pacifica vans from Fiat Chrysler (NASDAQ:FCAU) and outfitting them with Waymo technology and offering Chrysler a technology license.
Then there’s Apple (NASDAQ:AAPL), which can buy any car company in the world for the equivalent of seat cushion money. Apple’s Project Titan is focused on the software side of the problem, partnering with Volkswagen (OTCMKTS:VLKAY) on shuttles to get employees to its offices. Reportedly, several thousand engineers are involved, and the company has been patenting whatever it can but mass production isn’t scheduled until 2023.
The market cap of Ford stock is $37.6 billion, a rounding error on Apple’s $1.05 trillion. When Apple decides to ramp up production of self-driving cars, it can easily buy Ford.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in F.