Between the lines on Honda's massive investment in Cruise

Honda is joining forces with GM and Cruise on a new autonomous vehicle to be built and sold in global markets.

Driving the news: The Japanese carmaker is committing $2.75 billion to the project over the next 12 years, including an immediate $750 million investment in Cruise, GM’s self-driving car unit. The transaction, on top of a recent $2.25 billion investment from SoftBank investments, puts Cruise’s valuation (if it were a stand-alone company) at $14.6 billion.

Why it matters: GM has promised a world of “zero crashes, zero emissions, zero congestion” and sees large-scale deployment of self-driving electric cars as the answer. It plans to launch a fleet of self-driving Chevrolet Bolt EVs in San Francisco in 2019. The deal with Honda opens up new possibilities with a ground-up vehicle that can be adapted for multiple purposes and built in large numbers around the world.

Between the lines:

For Honda: The Japanese company is too small to afford the massive investment needed to develop autonomous vehicles on its own.

• It already had a deal with Google’s Waymo, the leader in self-driving cars, but that project seems to be going nowhere. By partnering with GM and Cruise, Honda assures it will be able to compete in self-driving cars.

For GM: Aside from the money, which further validates GM’s technology and business model, Honda brings unique engineering talents, especially when it comes to the efficient use of interior vehicle space.

• That kind of expertise is critical to develop the car of the future. Ever look inside a Honda Fit? You’ll be shocked how much room there is inside such a tiny car.
• Without a driver behind the wheel, there are lots of opportunities to reconfigure a car’s interior.
• Cruise founder Kyle Vogt says they’ve been quietly prototyping such a vehicle over the past two years, but getting the user experience right is the ultimate engineering challenge. Honda is the perfect partner.

The big picture: GM and Honda already have a long and trusted partnership on electric vehicles and fuel cells. “This is a partnership that has a running start,” says GM President Dan Ammann.

The bottom line: Together, GM-Cruise-Honda is a more potent rival for Google’s Waymo, the current leader in the autonomous technology race. Waymo will no doubt deploy its commercial robo-taxi service first, in Phoenix later this year, but GM is building massive global scale in hopes of being the ultimate winner.