The Softbank Vision Fund is investing $2.25 billion in Cruise, the arm of General Motors tasked with developing fully self-driving cars and putting them into commercial service sometime, somewhere, in 2019. It’s the most significant deal to date in a nascent but booming industry, and it confirms that GM, despite getting a late start compared to Google sister company Waymo, is among the leading players.
The investment will allow GM the financial flexibility to keep up Cruise’s rapid growth—it announced last year it’s adding 1,100 jobs over the course of five years—without taking away from its current, core, revenue-generating business: manufacturing human-driven cars, for humans to buy. And it gives Softbank a 19.6 percent stake in Cruise, which amounts to a major foothold in an industry that could be worth $7 trillion in the next few decades.
As long as government regulators OK the deal, Softbank will make the investment in two tranches, starting with $900 million, then $1.35 billion once Cruise puts its robocars in service. At the same time, GM itself is putting another $1 billion into its self-driving arm, which is based in San Francisco and operates with a fair deal of independence. As the technology moves steadily toward maturity, it’s attracting major money. A 2017 Brookings Institution report tallied up 160 deals in the self-driving space, worth a collective $80 billion. In February 2017, Ford cannonballed into the market, investing $1 billion in self-driving startup Argo. This new deal dwarfs even that. “This is as big as it gets,” Michael Ronen, managing partner of SoftBank Investment Advisors, said Thursday on a conference call.
GM caught Softbank’s eye with its commitment to safety, ability to manufacture cars at scale, and speed of development. “We were blown away by the Cruise team’s ability to iterate quickly,” Ronen said.
The WIRED Guide to Self-Driving Cars
Waymo started serious work on this technology nearly a decade ago and plans to launch a commercial ride-hailing service in Arizona by the end of the year. It’s now working with automakers to build its hardware and software into their vehicles. Earlier this year, it signed a deal to buy 20,000 Jaguar I-Pace SUVs over the next five years. Today, it announced that it will add 62,000 more Chrysler Pacifica minivans to its fleet, to go with the 600 it’s already using to test its tech.1
GM started dabbling in this technology when it worked with Carnegie Mellon University on the Darpa Urban Challenge, but its serious effort to match Waymo started in early 2016, when it bought Cruise for a reported $600 million. Since then, it has made a flurry of moves to catch up with Waymo and position itself not just to make cars drive themselves, but to make money doing it. GM bought a lidar company to wrangle hardware costs and manufacturing. It reconfigured its Orion assembly plant, outside Detroit, to build a robo-version of the all-electric Chevrolet Bolt, without a steering wheel or pedals. It launched a car-sharing service called Maven to get itself acquainted with business models where people don’t just buy a new car every decade.
GM and Cruise have not, however, made clear how their self-driving service will work, especially without a broader, established ride-hailing network into which it can plug the robots. (GM and Lyft announced a partnership in January 2016, but the romance has reportedly cooled.) “We’re focused right now on the hardest part of the problem, which is getting self-driving technology to the point where it’s commercially ready for deployment,” said Dan Ammann, GM’s president. “At that point, we can look at our options for what approach we take to market, or approaches. That’ll take shape over the next year or so.”
Whatever the answer, Softbank likes GM’s holistic approach to self-driving, Rosen said. The Japanese firm has gone somewhat Brewster’s Millions lately: It bought Boston Dynamics, plans to pump $100 billion into quantum computing, is working on self-driving buses, and is even getting into real estate and construction. Mobility-wise, it has major investments in Uber, Didi, and DoorDash.
With GM, Softbank is making a long-term play. The companies have agreed to a seven-year term before they can cash out. “That is a good benchmark for what we believe should be a good runway to get to even close to maturity,” Ronen said.
Indeed, it’s likely that self-driving car services will start small, in discrete geographic pockets where companies like GM and Waymo can limit potential problems, from complicated traffic to crazy weather to heavy-handed regulators. Growing this potentially world-changing technology into a worldwide business will take many years and billions of dollars. But GM just made one more move to keep itself near the front of the pack.
1Story updated at 12:25 ET on Thursday, May 31, 2018 to include news of the expansion of Waymo’s vehicle agreement with Fiat Chrysler.
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