The Honda logo. Picture: REUTERS/REGIS DUVIGNAU
The Honda logo. Picture: REUTERS/REGIS DUVIGNAU

Bengaluru — Honda Motor will invest $2bn and take a 5.7% stake in General Motors’ (GM’s) Cruise self-driving vehicle unit, extending co-operation between the two carmakers in a technology that has enormous costs and risk but no market-ready products.

Honda, which has lagged behind many of its rivals in developing self-driving vehicles, is paying $750m upfront for the minority stake in Cruise and will invest another $2bn over 12 years, the companies said on Wednesday.

Honda, GM and Cruise will jointly develop self-driving vehicles for deployment in ride service fleets around the world.

GM shares were up 3.5% in opening trade.

This investment is based on a shared vision and their [GM’s and Cruise’s] superior technologies in this area.
Seiji Kuraishi
Honda executive

In May, Japan’s SoftBank Group said it would buy a 19.6% stake in Cruise for $2.25bn.

Honda’s investment values Cruise at $14.6bn — about a third of GM’s market cap, $48.5bn. GM acquired the San Francisco-based start-up in March 2016 for a reported $1bn.

In comparison, analysts have pegged the value of Alphabet’s Waymo self-driving unit as high as $175bn. Honda has previously had discussions with Waymo about possible collaboration, but no deal was ever announced.

GM Cruise and Waymo are often described as leading the pack of technology and car 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."

Other global carmakers are forging similar alliances to share the uncertainty and huge price of developing technologies that have yet to gain widespread consumer acceptance.

Ford Motor and BMW have said they plan to deploy self-driving cars in 2021, while on Wednesday, at the Paris Auto Show in France, the heads of Daimler and Renault said the two companies may expand their co-operation to batteries, self-driving vehicles and mobility services.

The GM-Honda announcement extends a partnership that includes joint development of electric vehicles with hydrogen fuel cells that are expected to go on sale in 2020.

In June, Honda also said it would buy advanced batteries from GM in a move that could significantly reduce the cost of future electric vehicles at both carmakers after 2020.