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Autonomous Vehicles

Under the Hood on Honda’s Cruise Investment

Hyperbole and cheap headlines are the name of the game in self-driving cars, and today was a good example. GM said Honda would invest $2.75 billion in the efforts of its Cruise division, which is trying to develop robotaxis in San Francisco. In reality, Honda agreed to invest $750 million now and add $2 billion over the next 12 years. Moreover, GM’s regulatory filing says some of that money may come in the form of “shared development costs” for new components for a jointly developed autonomous vehicle. 

GM said Honda is taking a 5.7% equity stake in Cruise. That values the unit at $14.6 billion post-money, which is 30% of GM’s $48 billion market capitalization. But valuations in press releases often don’t tell the full story: Just look at the terms of SoftBank’s June investment in Cruise, which were revealed for the first time this week.

Lost in all of this is that Cruise’s cars in San Francisco are nowhere near ready to handle real customers. And in recent months, the company’s transition to a new version of the Chevy Bolt prototype has hurt the performance of some of Cruise’s software, said a person briefed about the situation. No amount of money or headlines about an investment from a rival automaker will help fix that.

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