Honda will use GM’s self-driving technology, invest $2.75 billion

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Honda is investing $750 million in Cruise, the self-driving car startup whose majority shareholder is General Motors. The deal values Cruise at $14.6 billion. The deal is important for Honda because until now it has been a laggard in the race to build self-driving cars.

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.

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. So far, Cruise has focused on modifying the Chevy Bolt for autonomous capabilities. But this new Honda vehicle will be designed from the ground up for autonomous operation.

“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,” 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.

Cruise’s main rival, Waymo, has been following a similar approach. Waymo knows it’s not realistic to manufacture self-driving cars itself, so it has instead signed deals with other automakers. Its initial self-driving service will be built around modified Chrysler Pacifica minivans—Waymo announced in June that it had ordered 62,000 of them. In the meantime, Waymo is working with Jaguar on a version of the I-PACE that’s custom-built for self-driving operation, which is due out in a couple of years.

The Honda announcement is another signal that Vogt has carved out significant autonomy for himself and his team inside the GM corporate hierarchy. Since the 2016 acquisition, Cruise has been a wholly owned subsidiary of GM. But then this spring, Cruise announced that it had accepted a $2.25 billion investment from Softbank.

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.

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