GM’s Cruise will get $2.75 billion from Honda to build a new self-driving car

Cruise Automation, the self-driving unit of General Motors, is teaming up with Honda, one of the world’s largest automakers, the company announced on Wednesday.

The two auto giants will collaborate on a purpose-built autonomous vehicle that can serve a “wide variety” of use cases and be manufactured at high volumes for global deployment. Honda will devote $2 billion to the effort over 12 years, which, together with a $750 million equity investment in Cruise, brings the total commitment to $2.75 billion.

It’s another enormous win for GM’s Cruise. Just last May, it announced a $2.25 billion investment from the SoftBank Vision Fund, a major venture investment effort that was started by the Japanese tech giant in 2016. Today’s transaction brings Cruise’s post-money valuation to $14.6 billion.

GM bought Cruise in 2016 for $1 billion to jump-start its self-driving efforts. The company says it plans to deploy its fully driverless cars, without steering wheel or pedals, for commercial ride-hailing use as early as 2019.

So what will this new vehicle built by GM and Honda look like? It wasn’t immediately clear, although Cruise Automation CEO Kyle Vogt teased some possibilities in a Medium post.

Shouldn’t the car of the future have giant TV screens, a mini bar, and lay-flat seats? Maybe it should. We’ve been quietly prototyping a ground-breaking new vehicle over the past two years that is fully released from the constraints of having a driver behind the wheel. Building a new vehicle that has an incredible user experience, optimal operational parameters, and efficient use of space is the ultimate engineering challenge. We’re going to do this right, and by joining forces with Honda we’ve found the perfect partner to help make it happen.

What is clear is that this purpose-built AV won’t look anything like the Chevy Bolt vehicles that Cruise is currently using as a platform for its self-driving experiments in San Francisco and Arizona. The company has one of the largest fleets of autonomous test vehicles in the Bay Area, with over 100 cars and permits for almost 400 drivers in California.

A deal this large will unavoidably have a ripple effect. Honda was rumored to be in talks with Waymo, the self-driving unit of Google parent company Alphabet, to build a self-driving delivery car. That deal would now appear to be moot, as Honda’s chief operating officer Seiji Kuraishi described the automaker’s partnership with Cruise as “exclusive.” However, in a call with reporters, executives declined to comment specifically on other companies. (A spokesperson for Waymo did not immediately respond to a request for comment.)

Deploying a purpose-built self-driving car without traditional controls in the US would require an exemption from the federal government’s motor vehicle safety standards. GM submitted a petition to the National Highway Traffic Safety Administration (NHTSA) for permission to deploy its fully driverless Chevy Bolt earlier this year, and it would most likely need another one before putting its vehicles built with Honda out into the world.

By committing to rolling out fully driverless cars in a shortened time frame, GM is seeking to outmaneuver rivals both old and new in the increasingly hyper-competitive race to build and deploy robot cars. Ford has said it will build an autonomous car without a steering wheel or pedals by 2021, while Waymo is preparing to launch its first commercial ride-hailing service in Phoenix featuring fully driverless minivans later this year.

There was a flurry of partnerships and investments around self-driving cars in 2016 and 2017, but that activity has since mostly died down, leading some critics to claim that the technology now finds itself in the “trough of disillusionment.” To be sure, there are still huge sums of money exchanging hands despite this lull. There was the Cruise-SoftBank deal in May. And in August, Toyota and Uber said they would join forces to build self-driving cars, in a deal that involved the Japanese automaker committing $500 million to the ride-hailing giant. There may be disillusionment in this trough, but there are huge piles of money, too.