WARREN, Mich: Honda Motor Co Ltd will invest US$2.75 billion and take a 5.7 per cent stake in General Motors Co's Cruise self-driving vehicle unit, to jointly develop self-driving vehicles for deployment in ride services fleets around the world.
Honda, which has lagged behind many of its rivals in developing self-driving vehicles, is paying US$750 million upfront for the minority stake in Cruise and will invest another US$2 billion over 12 years, the companies said on Wednesday (Oct 3).
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.
GM shares were up 2.4 per cent in morning trade.
In May, Japan's SoftBank Group said it would buy an initial 10 per cent stake, followed by another 9.6 per cent stake, in Cruise for US$2.25 billion.
Honda's investment values Cruise at US$14.6 billion - about a third of GM's market cap, US$48 billion. GM acquired the San Francisco-based startup in March 2016 for a reported US$1 billion.
By comparison, analysts have pegged the value of Alphabet Inc's Waymo self-driving unit 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. He added: “The longstanding relationship we have with Honda will allow us to move very quickly in ramping up our efforts.”
GM has been “very selective in our approach” to investors in Cruise and “we will evaluate other investment opportunities as they come along,” he said.
Ammann later told investors: "We're moving as quickly as we can to get to the point where we can initially deploy the technology and then scale it ... This is an effort that requires very, very significant resources to pull off."
Ammann said Honda will contribute its engineering know-how and will help GM Cruise build a global ride services business.
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.
Honda executive Seiji Kuraishi said: “This investment is based on a shared vision and their (GM’s and Cruise’s) superior technologies in this area.”
GM Cruise has a test fleet of more than 100 self-driving versions of the Chevrolet Bolt AV, rebadged as Cruise AV.
GM Chief Executive Mary Barra said the automaker is still focused on testing self-driving vehicles in San Francisco before expanding to other markets.
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.
Ford Motor Co and BMW have said they plan to deploy self-driving cars in 2021.
BMW, which has a development partnership with suppliers Intel Corp , Aptiv PLC and Magna International , expects some rivals and ride services companies to join its consortium for developing self-driving cars as auto industry profits come under increasing pressure, board member Klaus Froehlich said on Tuesday.
At the Paris Auto Show on Wednesday, the heads of Daimler AG and Renault said the two companies may expand their cooperation to batteries, self-driving vehicles and mobility services.
The GM-Honda announcement extends a partnership that includes joint development of electric vehicles with hydrogen fuel cells that are expected to go on sale in 2020.
In June, Honda also said it would buy advanced batteries from GM in a move that could significantly reduce the cost of future electric vehicles at both automakers after 2020.