It is an interesting time in the automotive industry with lots of money sloshing around trying to find a profitable home to make lots of future money.
A few weeks ago Motoring Weekly ran an article about SoftBank, a Japanese investment company buying a stake in General Motors Cruise Automation business. They committed to put in $2.2B in investment. GM spent a mere $1B on buying Cruise Automation a few short years ago, so they have done well to encourage others to join them in the investment stage.
Now Honda has announced that they are joining SoftBank with an even bigger investment: $2.75B. Like SoftBank, they will provide an immediate “downpayment” – in this case around $750M and the rest will be drawn down over twelve years. Like many global automotive groups, General Motors has had a development relationship with Honda for several years in new technologies, specifically fuel cells. All the major groups have one or more relationships with other manufacturers to try and share the costs of developing what they think will be the next big thing. This isn’t a new concept and often cars from several manufacturers will share components for cost and reliability purposes.
I can see some good things coming out of this new investment. For example, it means that more types of vehicles can now be kitted out with all the technology that Cruise have been developing – not just a Chevrolet Bolt! Honda could install it into a wider variety of cars and commercial vehicles for testing. Another, more concerning outcome might be related to testing. It is known that in many US States there are very strict rules around testing autonomous vehicles. Honda has factories in some Asian countries where those rules do not exist and as such they might see them as a location to test without Government oversight. This could mean a lower level of safety during the testing programs.
For a company that was at the forefront of electric vehicles nearly twenty years ago with the Insight hybrid vehicle, Honda seemed to lose its way somewhat and didn’t capitalise on what they had learned. Toyota, Tesla and many Chinese competitors certainly got well ahead of them. Instead, Honda looked at fuel cells and hydrogen power leaving the hybrid motors to be slow sellers.
Honda put their eggs into the fuel cell basket in the hope that fuel cells would take off quicker than electric power, however the opposite happened, mainly because of hydrogen refuelling infrastructure never really expanded from a handful of cities around the world. This new investment is much more strategic – it allows Honda to gain access to a technology structure that is far more likely to reach the markets faster than any other investments they have made. It is possible that the $5B that GM will receive in the next decade will be the defining reason why we will see true autonomous vehicles roaming our streets as robotaxis, which is something that SoftBank want. It takes away the most expensive bit of the taxi/ride-share service: the humans. For Honda, they will have an opportunity to sell more vehicles with state-of-the-art technology and for General Motors, it means their technology will go global faster than they could achieve on their own.
General Motors has shrunk back to the US in the last couple of years by selling off or closing certain assets and so Honda can really help them outside their home market.