Yesterday, Honda invested $2.75B in GM’s self-driving program, Cruise. Why are they getting in bed with a competitor?
As the race to build autonomous vehicles spreads out, slow-moving companies are hitching rides with industry leaders — and the tech companies behind it all are still on a roll.
If you can’t beat ’em, draft ’em
Two clear leaders have emerged in the crowded self-driving race: GM-Cruise and Google’s Waymo. But Ford bought an AI company called Argo in an attempt to catch up, and Mercedes, BMW, Toyota, and Volvo are all developing their own self-driving cars.
Meanwhile, some legacy automakers — Honda and Hyundai — have remained on the sidelines. Now, as the future of self-driving cars looks certain, the Japanese automaker seems to have finally gotten nervous.
Honda will invest $750m in Cruise immediately, doling out the remaining $2B over 12 years as part of a 5.7% stake in Cruise. The deal will bring GM closer to catching up with Waymo, and it will prevent Honda from falling out of the race entirely.
But Cruise is the real winner
When Cruise was acquired by GM, it sold for just $581m. But this new investment from Honda values the company at $14.6B, meaning the value of the company has increased 25x in less than 2 years.
Cruise also got $2.25B from Softbank just a few months ago — and its founders continue to run the company independently as GM’s youngest senior directors.
So you’ve got to ask yourself: Who’s really in the driver seat at GM?