Volkswagen and Ford’s new global alliance will bring improvements in cost savings, efficiencies and scale to boost the competitiveness of both automakers, according to Frost & Sullivan.

Volkswagen and Ford said they are committed to exploring potential collaboration on EVs, autonomous vehicles and mobility services

First announced last summer and expanded on earlier this month, the partnership will cover the commercial vans and medium pickup trucks arena to highlight the strong global demand that both companies foresee in these two segments.

“The agreement would provide scale and efficiency advantages in the commercial vehicle market, which has relatively lower volumes compared to the passenger vehicle market,” said Veerender Kaul, global vice president – commercial mobility at Frost & Sullivan. “The two companies could save hundreds of millions of dollars in product development costs, thereby improving the efficiency of deployed capital and assets. Additional savings will come from cost reductions in purchasing and manufacturing, further improving margins and free cash flow.”

According to the terms of the agreement, Ford will build medium-sized pickups for both companies – starting from 2022, and will engineer and build the larger commercial vans, while VW will build a city van. However, Ford’s F-Series pickup, its most vital asset in the US market, will not be part of the partnership.

In addition, Volkswagen and Ford have indicated that they are exploring further possibilities for collaboration in connectivity, autonomous driving, mobility, and powertrain electrification. The companies have already signed a memorandum of understanding to investigate potential opportunities in these areas and are working to align on strategy.

Both automakers will be hoping to draw on their respective competencies to accelerate innovation and growth. While VW has strong capabilities in electric vehicle technology, Ford has expressed its intent to look to the future by investing $4bn in autonomous driving, including the $1bn investment made in artificial intelligence start-up Argo AI in 2017.

“It is likely that Ford and VW have been discussing collaboration on connected, autonomous, shared mobility and electrification strategies (CASE) through 2018,” added Mark Fitzgerald, mobility consultant at Frost and Sullivan. “We are unlikely to see the results of an alliance on CASE technologies until the next-generation of vehicles are launched in the 2022-2024 timeline.”