Honda Motor Co Ltd will invest $2.75 billion and take a 5.7 percent 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 $750 million upfront for the minority stake in Cruise and will invest another $2 billion over 12 years, 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, Japan's SoftBank Group said it would buy an initial 10 percent stake, followed by another 9.6 percent stake, in Cruise for $2.25 billion.
Honda's investment values Cruise at $14.6 billion - about a third of GM's market cap, $48 billion. GM acquired the San Francisco-based startup in March 2016 for a reported $1 billion. By comparison, analysts have pegged the value of Alphabet Inc's Waymo self-driving unit as high as $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.
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