DETROIT – Cruise, the self-driving car startup backed by General Motors, is getting a $750 million investment from Honda, creating a market value for Cruise at $14.6 billion.
Honda has been lagging in the competition to bring Connected and Autonomous Vehicles to market, so this deal gives the Japanese car maker the chance to catch up to the leaders. It also allows GM to design a CAV from the ground up rather than relying on modifying the Chevy Bolt for autonomous capabilities.
Honda also said on Wednesday that it plans to invest $2 billion over the next 12 years to develop and manufacture self-driving cars based on Cruise’s software.
“Honda will work jointly with Cruise and General Motors to fund and develop a purpose-built autonomous vehicle for Cruise that can serve a wide variety of use cases and be manufactured at high volume for global deployment,” Honda said in a press release.
Now Cruise has three shareholders: GM, Softbank, and Honda. GM still holds a large majority of the shares in Cruise. But having minority shareholders gives Vogt more independence, since he needs to take in minority shareholders’ interests as well as GM’s. The new structure also makes it easier for Cruise to offer its employees stock options in Cruise rather than GM—giving them much more potential upside if the company is successful.
Honda has been working on autonomous vehicles since at least 2015, but progress has been slow. In 2015, the company said it hoped to have a partially self-driving car ready by 2020 but that a fully self-driving car won’t be ready until the 2030s.
In 2017, Honda said it was aiming to offer freeway-only self-driving capabilities in 2020 and then reach “level 4” capability—cars that are fully self-driving, but only in certain locations and weather conditions—by 2025. That compares unfavorably to Waymo, which is planning to launch a level 4 taxi service this year. Cruise is aiming to launch a level 4 taxi service next year.
Honda’s new plan is to build self-driving cars based on Cruise’s hardware and software designs.
“Honda will work with Cruise and GM to develop an innovative, space-efficient autonomous vehicle that delivers an exceptional experience and minimizes congestion on crowded city streets,” Cruise CEO Kyle Vogt said in a blog post announcing the deal.
This could potentially give Honda a big shortcut to fully autonomous vehicles. Cruise may or may not achieve its own goal of launching a commercial service in 2019. But it seems very likely that the company’s technology will be ready long before Honda’s own target of 2025 for level 4 vehicles.