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General Motors & # 39; (NYSE: GM) The independent subsidiary has a new investor: Honda Motor Company (NYSE: HMC) invests $ 750 million in Cruise, giving the San Francisco-based San Francisco subsidiary a post-financing valuation of $ 14.6 billion.
Under the agreement, Honda will also contribute $ 2 billion over the next 12 years to the development and commissioning of a new vehicle designed as a self-driving, man-free vehicle.
GM, Cruise and Honda have released this "teaser" image of a future "custom built" autonomous vehicle. Source of the picture: General Motors.
The first autonomous vehicle "custom built"
Cruise has been working since 2016 on its first autonomous vehicle, a heavily modified version of the Chevrolet Bolt EV. Cruise has been working hard to create a stand-alone vehicle that can be mass-produced on Bolt's existing assembly line in Michigan. GM and Cruise intend to start deploying this Bolt-based vehicle in urban driving services next year.
This agreement is the next step beyond this autonomous bolt. GM, Cruise and Honda will work together to develop a "bespoke" autonomous vehicle that is not constrained by the need to provide a human driver. This vehicle, the two companies announced in a press release issued Wednesday, "will serve a wide variety of use cases and will be manufactured in large quantities for worldwide deployment".
The partners said that Honda's $ 2 billion investment in this vehicle program would be paid over 12 years, but the timing for the release of this vehicle is not yet known. (It's probably a little under 12 years old.)
Cruise 's first autonomous vehicle is a heavily modified Chevrolet Bolt EV that is expected to go into production next year. His next vehicle will be developed with the help of GM and Honda. Source of the picture: General Motors.
Why does GM let Honda invest in Cruise?
GM and Honda being rivals, why does GM leave Honda a stake (about 5%) in its arm's length subsidiary?
The answer is that GM and Honda have also been partners for several years in several future technology initiatives. Honda and GM have been working together for several years on fuel cells. In June, Honda signed an agreement to purchase GM battery packs for use in its own electric vehicles.
In simple terms, GM knows that its engineers can work well with those of Honda and that both companies trust each other. This investment makes sense for two reasons: it gives Cruise a bigger budget and gives Cruise and GM access to more technical resources around the world.
Why would Honda want to invest in Cruise?
Car manufacturers around the world are striving to develop self-driving technology to meet the challenges of high-tech, high-tech competitors. Already, a technology company seems to have taken the lead in the deployment of autonomous vehicles: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) The subsidiary Waymo is deploying its own autonomous taxi service.
Honda's stand-alone development program is nothing like this. The company announced last year that it was unlikely to release its first Level 4 autopilot system until 2025. (A "tier 4" system is one that is limited, usually to areas To find out more about the "levels" of autonomous vehicle technology here.)
GM and Cruise, on the other hand, are close to Waymo (and probably almost everyone else.) Investing in the Honda Cruise Archways is at the forefront of the Autopilot race and gives it the prestige of co-driving. to develop what is probably the first autonomous vehicle built for this purpose to be produced in series.
("Prestige", in this case, goes beyond what we can boast: Honda's participation in this project will help to hire and retain engineers with relevant experience in the field of autonomous cars These engineers are currently in great demand.)
The Bolt Cruise vehicle does not have a steering wheel. The next can not even have a windshield. Source of the picture: General Motors.
The result: a lot of interesting possibilities
With this deal, Honda becomes the second largest outside investor in Cruise, joining SoftBank Groupof (NASDAQOTH: SFTBF) Vision Fund, which agreed to invest $ 2.25 billion in Cruise in May. In between, about 25% of Cruise is now owned by companies other than GM.
The agreement opens up many exciting opportunities, including a big one for investors: will GM sell Cruise to a public offering, or will it create a "tracking stock" that will allow investors to participate directly in the company? – and GM to carry out part of his assessment?
I guess something in that sense might be in preparation. Stay tuned.
Suzanne Frey, a member of the Alphabet Executive, is a member of The Motley Fool's board of directors. John Rosevear owns shares of General Motors. Motley Fool owns shares and recommends Alphabet (A shares) and Alphabet (C shares). Motley Fool has a disclosure policy.
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