Fresh Inflow of Funds Gives New Life to GM’s Cruise Plans
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Autonomous Vehicle Division of General Motors Gets Further Funding
General Motors’ ($GM) Cruise self-driving division has now a brighter future thanks to an additional input of equity investments worth $1.15 billion. This has helped raise its valuation to $19 billion. If you remember, Cruise had already received funding worth $7.25 billion from the Softbank Vision Fund, Honda, T. Rowe Price Associates and also from parent company GM. Honda has already committed $2.75 billion to Cruise over the course of the next 12 years, with the initial investment being $750 million. Both the companies are actually working together to launch an autonomous car. It may seem strange to see competitors collaborating, but there is a reasoning behind this as this Motley Fool article describes.
Apart from GM, the leading, traditional automakers including Honda are way behind in self-driving technology even though it’s the hot topic now. Toyota has not yet got to the Level 4 standard of self-driving, and it has reported that it would only get there by 2025. In the meantime, these big automakers are facing competition not from other conventional automakers, but tech companies such as Google ($GOOG, $GOOGL) and electric car company Tesla ($TSLA).
Honda Wants to Catch up with Waymo and Others
Google’s Waymo leads the competition, and the big, conventional automakers need to develop this soon or get left behind as the self-driving tech gets to the consumer market. That’s why Honda considers it worthwhile to benefit from the research and advanced autonomous vehicle (AV) development stage that GM’s Cruise division is in. It saves the Japanese company a great deal of R&D costs. Working with GM instantly takes Toyota to the head of the AV race. That means it also has the attractiveness to hire more engineers specialized in this technology, before they get whisked by Google or Toyota’s competitors.
More Funding Proves Cruise Is Heading to the Big Day
The Softbank Vision Fund is run by Softbank Group, and it had committed $2.25 billion previously to Cruise. This is a big shot in the arm for GM’s AV division, though it has not specified when its ridesharing services will hit the market. But investors can relax in the fact that this latest funding is further proof that Cruise is heading closer to that.
Investors also need to be patient since the autonomous vehicle market is still in its early stages. It will take some years for GM to generate good revenue from its self-driving ridesharing service. But the immense potential for this segment makes it worth the wait.
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