Toyota makes a massive investment in Grab

Toyota Motor Corp. will make a $1 billion investment in Singapore-based cab service company Grab. The investment, which is the largest thus far by a car manufacturer in a ride-hailing company, gives Grab a valuation of over $10 billion. A Toyota executive will join Grab’s board of directors, and a Toyota team member will be added to Grab’s executive leadership team.

This is not Toyota’s first investment in Grab. The Japanese carmaker’s trading arm, Toyota Tsusho, made an undisclosed investment in the ride-hailing company last year. With this new collaboration, Toyota and Grab will be able to share technology, broaden offerings in insurance and maintenance and also expand food delivery and mobile payment services. The investment was part of a larger financing effort by Grab.

Two years ago, Toyota also invested an undisclosed amount in Grab’s rival Uber, whose Southeast Asian operations were acquired by Grab earlier this year. Apart from Toyota, companies like Hyundai, Honda and Didi Chuxing have invested in Grab. Automakers now feel the increasing need to move into other services and stop relying on traditional automobile manufacturing alone.

Apart from Toyota, companies like Hyundai, Honda and Didi Chuxing have invested in Grab

As the automobile industry faces trends such as the move towards ride-sharing services, alternative energy vehicles as well as autonomous ones, automakers feel the need to invest in these areas. General Motors (GM) and Volkswagen have made investments in Lyft and Gett respectively. SoftBank Group has investments in Grab and Uber with plans for an investment of more than $2 billion in GM’s self-driving subsidiary Cruise.

According to a report released by Bain & Company, China is the largest market in the world for digital ride-hailing services valued at about $23 billion, and Didi Chuxing holds a 90% share of all electronic ride-hailing trips. The ride-hailing business will see a dramatic change with the advent of autonomous vehicles.

As per the study, which was mainly focused on China, the electronic ride-hailing volume is expected to grow to $72 billion by 2020, which will be an eleven-fold increase from just five years ago in 2015. It also showed that the electronic ride-hailing market had grown to $30 billion in 2017 from $5 billion in 2014. The user count over the aforementioned three-year period grew from 30 million users to 217 million users.