Softbank Vision Fund to invest $2.25B in GM’s Cruise

The Softbank Vision Fund is investing $2.25 billion in GM Cruise Holdings LLC, which is primarily made up of Cruise Automation, the driverless car developer GM acquired in 2016 for nearly $1 billion. When the deal closes, Softbank Vision Fund, an affiliate of Japan’s SoftBank Group Corp., will own a 19.6 percent stake in GM Cruise Holdings LLC.

According to the announcement, the investments will be made in stages. When the transaction closes, Softbank Vision Fund will invest $900 million. When Cruise is ready to scale its autonomous ride-sharing fleet, which it said remains on track for the beginning of 2019, the fund will provide the remaining $1.35 billion. GM will also invest an additional $1.1 billion in GM Cruise.

The investments are expected to inject enough capital into Cruise to help it deploy self-driving cars “at massive scale.” Softbank Vision Fund’s investment into GM Cruise values the business at $11.5 billion. GM shares surged 11 percent to $42.07 in morning trading.

“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage,” said Michael Ronen, managing partner, SoftBank Investment Advisers. “We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”

GM, the largest automaker in the United States, views electric and autonomous vehicles as the future of transportation. It has combined those two technologies in the 180 autonomous Chevrolet Bolt electric vehicles it’s testing in Detroit, Phoenix and its hometown of San Francisco. GM Cruise has grown from 40 employees to 800-plus since the 2016 acquisition.

Analysis of Softbank’s investment in GM Cruise

The $2.25 SoftBank investment comes at a time when GM Cruise rivals Tesla, Uber, Waymo and others vie to be the first to commercialize self-driving cars in some capacity. Tesla and Uber have struggled with recent crashes, while Waymo continues to lead the autonomous vehicle space. But many signs point to GM Cruise being Waymo’s toughest competitor, including 2017 disengagement data released by the California Department of Motor Vehicles.

An important milestone on our journey to safely deploy self-driving cars at scale. Incredibly proud of what the @Cruise team has accomplished in just a few short years! https://t.co/10Zoc4xXl7

— Kyle Vogt (@kvogt) May 31, 2018

An Uber self-driving car killed a woman in March 2018 after failing to see her walking her bike across the street at night in Tempe, Arizona. And on Tuesday, a Tesla semi-autonomous sedan driving on autopilot crashed into a parked police cruiser in Laguna Beach, California.

Waymo is also developing electric self-driving vehicles. It recently partnered with Jaguar to add 20,000 electric I-PACE SUVs to its self-driving fleet. Waymo currently tests its self-driving system on about 600 Chrysler Pacifica minivans built by Fiat Chrysler Automobiles. The company has also been testing self-driving vehicles without drivers in Arizona. It plans to launch a ride-hailing service later in 2018.

The Softbank investment is certainly a capital infusion to help GM Cruise keep pace with Waymo and bring an autonomous ride-sharing service to market. But it also gives GM built-in marketshare for its autonomous vehicles. The $100 billion Softbank Vision Fund, led by Softbank chief executive Masayoshi Son, has made other major bets on the changing transportation landscape.

Son wants to build a global network of autonomous ride-sharing companies, according to analysts. His fund has already invested nearly $20 billion into several ride-hailing companies, including Uber and Chinese ride-hailing company Didi Chuxing Technology Co. GM, meanwhile, holds a sizable stake in Uber rival Lyft.

Softbank Vision Fund has also invested in Nvidia, which is developing an AI computing platform for self-driving cars, and a $164 million investment in mapping startup Mapbox Inc.

GM Cruise is already using part of its self-driving fleet to carry Cruise employees “anywhere in San Francisco using their app” – an early version of the service it plans to offer to the public in 2019. Watch a demo of service in the video above.

Deutsche Bank analyst Rod Lache called the Vision Fund’s investment “a very big deal.” He said breaking out GM Cruise as a separate entity should give GM access to capital that it wouldn’t have on its own.