Date
16 October 2018
Honda’s investment boosts the value of Cruise to US$14.6 billion – about a third of GM’s US$48 billion market cap. Photo: Reuters
Honda’s investment boosts the value of Cruise to US$14.6 billion – about a third of GM’s US$48 billion market cap. Photo: Reuters

Honda to invest US$2.75 billion in GM’s self-driving car unit

Honda Motor Co. Ltd. will invest US$2.75 billion and take a 5.7 percent stake in General Motors Co.’s Cruise self-driving vehicle unit, to jointly develop autonomous vehicles for deployment in ride services fleets around the world, Reuters reports.

Honda’s partnership comes months after Japan’s SoftBank Group made its own multibillion-dollar commitment to Cruise. That puts Cruise in a league with Alphabet Inc.’s Waymo unit in terms of resources and aggressive plans to launch commercial services.

Honda, which has lagged behind many of its rivals in developing self-driving vehicles, is paying US$750 million upfront for the equity stake in GM’s Cruise and will contribute another US$2 billion over 12 years in development work and fees, the companies said on Wednesday.

The deal, which calls for Honda to provide engineering expertise, extends cooperation between the two automakers in a technology that has enormous costs and risk but no market-ready products.

Other global automakers are forging similar alliances to share the uncertainty and huge price of developing technologies that have yet to gain widespread consumer acceptance.

In May, SoftBank said it would buy stakes in Cruise totaling 19.6 percent for US$2.25 billion.

Where SoftBank is primarily a financial partner, “we view Honda as a strategic investor”, sharing in vehicle, systems and business development with GM, wrote RBC analyst Joseph Spak in an investor note.

In a blog post early Wednesday, Cruise chief executive and co-founder Kyle Vogt joked: “Honda is joining the party. They’re bringing chips, dip, and US$2.75 billion.”

Vogt told Reuters that Cruise and Honda would design a vehicle intended to be autonomous, rather than the modified sedan with a steering wheel and driver controls that it is working on now.

“We’re still shooting for 2019 to have the first version or first wave of vehicles that come out on our own platform. This is what comes after that,” he said.

Honda’s investment boosts the value of Cruise to US$14.6 billion – about a third of GM’s US$48 billion market cap. GM acquired the San Francisco-based startup in March 2016 for a reported US$1 billion.

By comparison, analysts have pegged the value of Waymo as high as US$175 billion. Honda has had discussions for two years with Waymo about possible collaboration, but no deal has been announced.

In a media briefing on Wednesday, GM president Dan Ammann said 2019 “remains the goal” for GM Cruise to launch a self-driving ride services fleet.

“The longstanding relationship we have with Honda will allow us to move very quickly in ramping up our efforts,” he added.

In January, GM filed a petition seeking US government approval for a fully self-driving car – one without a steering wheel, brake pedal or accelerator pedal – to enter the automaker’s first commercial ride-sharing fleet in 2019.

GM Cruise and Waymo are often described as leading the pack of technology and auto companies competing to create self-driving cars and integrate them into ride services fleets.

GM Cruise has a test fleet of more than 100 self-driving versions of the Chevrolet Bolt, rebadged as Cruise AV.

Waymo has agreements with Fiat Chrysler Automobiles and Jaguar Land Rover to buy and equip tens of thousands of vehicles with its self-driving systems.

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CG

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