General Motors’ (GM) autonomous car program got a major boost after Japan-based SoftBank Vision Fund agreed to invest $2.25 billion in GM Cruise Holdings. Following the announcement, shares of the Detroit-based automaker climbed nearly 12% in the early trading hours Thursday after closing the last session up 1.2%.
GM expects the funding will enhance its capital to the levels required for commercialization of Cruise at scale by next year. As per the terms of the agreement, once the transaction closes, tentatively by June end, GM also will invest $1.1 billion in Cruise.
SoftBank, the largest tech investment company in the world, will fund the Cruise project in two phases – an initial investment of $900 million, followed by $1.35 billion when the autonomous vehicles are ready to hit the market after securing regulatory approvals. The investment will make SoftBank Vision Fund eligible to own a 19.6% stake in GM Cruise, which will operate as a GM unit.
“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. 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,” said Michael Ronen, managing partner of SoftBank Investment Advisers.
GM in a statement said that while taking forward the driverless technology, the main emphasis will be on safety. The vehicles will be rolled out for commercial use only after ensuring that they fully comply with the safety norms. GM’s well-equipped assembly plant in Michigan, which the company retooled recently, gives it a unique advantage over competitors.
Once the transaction closes, tentatively by June end, GM also will invest $1.1 billion in Cruise
If GM meets the 2019 production goal, it will become the closest competitor to Alphabet’s (GOOG, GOOGL) Google’s Waymo – currently the frontrunner in the autonomous transport sphere. Uber, another strong contender in the segment, and Waymo are yet to make official announcements with regard to their production targets.
Earlier, GM had sought regulatory nod to start operation of about 2,500 driverless taxis by 2019, without brake and accelerator pedals and steering wheel, in a sign that the Cruise automation project is on the fast track.
Last month, GM reported a decline in first quarter earnings mainly owing to charges related to the closure of South Korean operations. Also, revenues did not benefit much from the company’s aggressive shift from passenger cars to crossovers.