Honda invests $2.75 billion in GM's autonomous driving unit Cruise

In the process of developing self-driving cars, General Motors has brought in a heavyweight ally - Honda.

In recent years, due to increasing investment, General Motors and its autonomous driving division Cruise Automation (hereinafter referred to as Cruise) have become one of the industry leaders. Honda has been unable to keep up with the pace of the entire autonomous driving industry due to its excessive conservatism and caution.

However, this Japanese giant is not willing to lag behind the trend of the times. On October 3, Honda announced that it would join the GM camp to jointly develop self-driving cars and complete large-scale production and global deployment.

This is the second partner that GM and Cruise have brought in.

Previously, SoftBank Vision Fund announced that it would invest $2.25 billion in Cruise, and Honda would invest $750 million in Cruise. In addition, Honda will invest $2 billion in Cruise by 2030. This means that Honda will invest a total of $2.75 billion in Cruise.

"With Honda's resources and capabilities, we will move faster," said General Motors Chairman Dan Ammann at a press conference on Wednesday. After the cooperation between the two parties, Honda will acquire a 5.7% stake in Cruise.

After receiving the new investment, Cruise's valuation rose to US$14.6 billion (the valuation was US$11.5 billion when it received investment from SoftBank).

When GM received the investment from SoftBank, it made clear that it welcomes other partners to join. However, when announcing the joining of new partner Honda, Ammann added, "We are also very picky in selecting partners because the project resources are quite rich."

Cruise's valuation has been growing steadily since it was acquired by GM for $581 million in cash two years ago. According to Leifeng.com's New Intelligent Driving, GM was also desperate at the time, and it is rumored that including bonuses for various core members, GM spent a total of nearly $1 billion to acquire this small company.

After Honda joined, GM's autonomous driving strategy has also been upgraded accordingly. Unlike the original single Chevrolet Bolt, this time the two parties want to build a multi-purpose dedicated autonomous driving vehicle.

However, Ammann was reluctant to disclose the detailed timetable for the release of the new car. He only reiterated GM's goal of zero pollution, zero traffic jams and zero casualties. According to Cruise CEO Kyle Vogt, over the past two years, the team has been secretly developing a groundbreaking new car, hoping to completely get rid of the traditional driver-centric thinking.

According to Leifeng.com, GM will focus on two areas: self-driving taxis and logistics vehicles. GM is determined to "cut off its own retreat" by removing all steering wheels and pedals. At the same time, it will also use this technological change to achieve new business breakthroughs. The single business model of making and buying cars may become a thing of the past.

Although they have always been competitors, GM and Honda have also had a lot of cooperation in recent years: the two companies have been working together to develop hydrogen fuel cell technology, and the fuel cell plant in Michigan will officially go into production in 2020.

Since self-driving cars will initially operate in geo-fenced areas, hydrogen fuel cells are also very suitable for use as vehicle power systems, after all, they do not need to be slowly charged at charging stations like electric vehicles.

However, when it comes to infrastructure construction, hydrogen fuel cell vehicles are still far behind, so their appeal to individual buyers is limited. But for fleets, widespread hydrogen refueling stations are not that important, as long as they can support fleet operations.

In an interview, Grayson Brulte, co-founder of automotive consulting firm Brulte & Co., said, "Obviously, market consolidation has already begun. The autonomous driving ecosystem is not a winner-takes-all, and we don't need 20 different autonomous driving systems. Players must choose their camps and move towards the same goal, to create autonomous driving cars that users need."

In his view, this cooperation will help promote GM's autonomous driving technology globally and accelerate the deployment of Honda's autonomous driving vehicles.

It is important to note that GM's plan to deploy an autonomous taxi service in San Francisco next year will not be disrupted. The product jointly developed by GM and Honda will become the successor model of the Bolt, which may be available in the next three years.

In fact, it is somewhat unexpected that Honda can provide such a huge investment in Cruise, because the outside world has always believed that Honda should cooperate with Waymo.

In 2016, there were reports that Honda was in contact with Waymo and that the two sides would cooperate in the field of autonomous driving. Gartner analyst Mike Ramsey said: "It is difficult for Honda to develop autonomous vehicles on its own, so it wants to find a partner, and the Japanese giant happens to have a good relationship with GM."

At the press conference, Honda COO Seiji Kuraishi clarified that the cooperation with GM and Cruise is exclusive.

This means that the cooperation between Honda and Waymo has completely failed. This makes people wonder what happened between Honda and Waymo? Kuraishi was unwilling to disclose the details on this issue.

From a business perspective, cooperating with General Motors is indeed more in line with current interests.

After all, Waymo has long stated that it wants to keep a tight grip on the control of autonomous driving technology and data. For car manufacturers, this means that their plan to make money from data will fail, and they may completely lose the initiative and become vassals of Waymo. On the contrary, if they become a partner of GM, they will have better access to technology and data and control their own destiny.

Looking at the entire autonomous driving industry, Waymo and GM are indeed in a leading position. Waymo's fleet will have 80,000 autonomous vehicles in the next 3 to 4 years, while GM has gathered strength from many parties and has a huge advantage among automakers that can crush Waymo.

Other manufacturers are also accelerating their pursuit. In September this year, Toyota invested $500 million in Uber, and after the legal battle with Waymo and the fatal accident in March this year, Uber was indeed hurt. General Motors' old rival Ford has also accelerated its pace. The latter's autonomous driving department has received huge funds and plans to mass-produce autonomous vehicles in 2021.

Attached is the full text of Cruise CEO Kyle Vogt’s speech:

Four months ago, we welcomed our partner SoftBank, which planned to invest $2.25 billion in Cruise. Today, we have a new partner, Honda, joining us with full sincerity, technology, and $2.75 billion.

However, the most important thing is still the cooperation between companies. We want to jointly develop an innovative and space-saving (Note: Honda's nickname is the Space Magician) self-driving car to bring a unique experience to users and eliminate traffic jams.

For us, sharing GM's technology is the best choice. Honda's participation will not only speed up the progress of the entire project, but also expand the audience of autonomous driving technology.

There is a golden rule in the automotive industry that it takes at least four years to develop a new mass-produced model, and it costs more than $1 billion to complete the design, production and market launch.

Don’t forget, this is with an existing production line and an experienced team (if not, you’ll have to add another billion). Most companies don’t have this strength, so their R&D cycle will be longer, which is why the navigation systems and music players in cars now always look so outdated.

We have been accelerating the deployment of autonomous driving technology, which is why Cruise is using GM's existing electric vehicle platform. We have to race against time.

Cruise is now able to manufacture self-driving cars using a common production line. With production issues resolved, we can focus on iteration and reduce risk in future mass production. We are also excited to share our experience with customers in the near future.

With our first self-driving cars on the road soon, it’s time to talk about what’s next. For the past two years, we’ve been secretly developing a breakthrough new car that breaks away from traditional driver-centric thinking.

To be honest, creating a car with a perfect user experience, optimal operating parameters and efficient use of space is a huge engineering challenge that we are working on. With Honda's help, we have found the best partner to achieve this task.

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