A man walks past a Grab office in Singapore. Picture: REUTERS
A man walks past a Grab office in Singapore. Picture: REUTERS

Tokyo/Singapore — Toyota is making the largest bet by a vehicle maker on ride hailing as it embraces new businesses that threaten to disrupt the industry’s traditional model of vehicle ownership.

The world’s most profitable car manufacturer is investing $1bn in Singapore’s Grab, valuing Southeast Asia’s largest car-hailing service at just more than $10bn, according to a person familiar with the transaction. It follows an initial investment in 2017 through Toyota’s trading arm in the company that forced Uber out of the region.

Toyota’s outlay in Grab is double the size of General Motors’ investment in Lyft in 2016, underscoring the sense of urgency CEO Akio Toyoda has in shifting the company towards mobility services. The company founded by Toyoda’s grandfather is preparing for intensifying competition from peers as well as technology giants as the industry transforms.

“This is a good decision. Toyota should not be late in this area,” said Tatsuo Yoshida, an equities analyst at Sawakami Asset Management in Tokyo.

“Ride sharing is coming. For car companies, this is a painful reality. But it can be a business opportunity if they understand it correctly,” he said.

Car makers and technology firms are working towards a future in which autonomous robo-taxis will reduce the need for individual car ownership.

Toyoda is due to face shareholder questions at an annual general meeting on Thursday and is putting in the money after GM’s Cruise autonomous-car unit netted a $2.25bn investment from billionaire Masayoshi Son’s SoftBank.

Car makers are seeking to strengthen their tech expertise as new rivals such as Waymo and Tesla threaten to redefine the vehicle industry.

In the cross-industry collaboration on those disruptive technologies, car makers bring two advantages: knowledge of how to build a car and the factories to do it. What they lack is the legions of software engineers at the disposal of tech companies in Silicon Valley and Shanghai.

Toyota, the world’s most valuable car maker with a market capitalisation of $221bn, has sought partnerships with tech companies in a bet that data will be a key part of its future.

Toyota has partnered with ride-hailing companies beyond Grab, taking a stake in Uber in 2016 and announcing a collaboration with China’s Didi Chuxing in January. It has also backed Japan Taxi, an Uber rival run by the chairman of Tokyo’s biggest taxi operator. Toyota had about $54bn in cash, equivalents and short-term investments as of March 31, giving it the firepower for deal making.

As part of the pact announced on Wednesday, a Toyota executive will be appointed to Grab’s board. Toyota and Grab declined to comment on Grab’s valuation or the size of Toyota’s stake. The investment was due to take place around the end of June, Toyota said.

“A board seat almost guarantees that Grab will buy cars from Toyota,” said Steve Man, a Hong Kong analyst at Bloomberg Intelligence.

Toyota and Grab are exchanging information on autonomous driving, but no decision has been made on collaboration in that area, a Toyota spokeswoman said. The automaker is still discussing which executive to send to Grab’s board, and is considering dispatching “a number” of Toyota employees to its partner, the spokeswoman said.

To be sure, no partnership in the car industry is a guaranteed success. GM’s president is stepping down from Lyft’s board in the latest sign that they aren’t becoming the close allies they had hoped to be. Toyota’s relationship with Tesla unraveled after four years amid culture clashes and recalls.

At about $10bn, Grab is still a relatively small player. Uber was valued at $62bn in a stock deal announced in May, and Didi Chuxing was valued at $56bn after a fundraising round in December.

Six-year-old Grab has powerful backers though, including Uber, Didi and Son’s Softbank.

In March, Grab boosted its grip on Southeast Asia by buying Uber’s business in the region. However, Grab still faces fierce competition from Indonesian rival Go-Jek, which is expanding ride-hailing and other services in Southeast Asia.

“This investment isn’t necessarily about making money, but about getting access to technology that fits in some place in Toyota’s broader business,” said Edwin Merner, the Tokyo-based president of Atlantis Investment Research Corp., which doesn’t own Toyota shares but is invested in Toyota Tsusho. “If Toyota can build up knowledge on things like automated navigation, this is worth it. It’s a kind of R&D.”

Bloomberg

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