SoftBank Group's Vision Fund exited its bet on the General Motors self-driving car subsidiary Cruise, as the car maker upped the ante, investing another $3.45 billion in the loss-making unit.
SoftBank's departure, which comes as the Japanese conglomerate struggles with debts, prompted questions from sector watchers about whether Cruise is ready to generate meaningful revenue for the time being, and how deep GM might have to dig to fund development.
GM said on Friday that it has agreed to pay $2.1bn to buy the SoftBank Vision Fund stake in Cruise, and to make a separate $1.35bn investment in the unit that SoftBank had committed to make in 2018.
Combined, the transactions will bring GM's stake in Cruise to 80 per cent, GM said. Other remaining shareholders in Cruise include Microsoft, Walmart and Honda Motor.
In 2018, SoftBank invested $900 million in Cruise and said it would invest another $1.35bn when the company's autonomous vehicles were ready for commercial deployment, potentially bringing its stake to 20 per cent.
As recently as last month, Cruise said SoftBank would invest the $1.35bn in the company as outlined in 2018.
A person briefed on the matter said SoftBank, including follow-on fundraising rounds after 2018, invested about $1.2bn in Cruise in total. The person declined to be identified because the information was not public.
The SoftBank exit comes as Cruise awaits a regulatory permit to allow it to charge riders for a driverless ride-hailing service launched in San Francisco.
"Based on the experience that we have seen from Alphabet's Waymo in Arizona, the revenue that you will generate from that deployment will be very, very small," said Raj Rajkumar, professor of electrical and computer engineering at Carnegie Mellon University, referring to a project developed by the parent of Google.
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A self-driving car operated by California start-up Zoox. The company began to test its technology on public roads in Las Vegas in 2019. Reuters -
W Motors chairman and chief executive Ralph Debbas in the company's self-driving prototype. The company was founded in 2012 but became famous after one of its vehicles, the Lykan HyperSport, was featured in the 2015 film 'Furious 7'. Victor Besa / The National -
The W Motors self-driving vehicle prototype, on display at the International Defence Exhibition and Conference in Abu Dhabi in 2019. Victor Besa / The National. -
Cruise, the self-driving vehicle company backed by General Motors and Honda, will launch its first international robotaxi service outside the US in Dubai in 2023. Cruise -
A driverless Cruise vehicle at the Detroit Motor Show. The company is stationing five self-driving cars in San Francisco as it looks to develop a robot taxi service. AP -
The 10-seater smart driverless car tested by the Roads and Transport Authority in Business Bay, Dubai. Courtesy RTA. -
Ajman's first self-driving bus went on goes on its first official drive in November 2021, with Sheikh Rashid bin Humaid Al Nuaimi, director of Ajman Municipality and Planning Department and UAE's Minister of Artificial Intelligence, Omar bin Sultan Al Olama, onboard. -
A Zoox robot taxi. The vehicle is loaded with sensors, has no steering wheel and is capable of transporting four people at up to 120 kilometres per hour. Photo: Zoox -
A self-driving car operated by Pittsburgh start-up Argo AI in New York. The company is working with Lyft and Ford to commercialise driverless ride-hailing services at scale. AFP -
Volvo's self-driving 360c concept car, which was first announced in 2018 and can function as a mobile office or transform into a sleeping area. Volvo says the 360c will create demand for inter-city taxi passengers travelling as far as 300km. Photo: Volvo
"It is a long road ahead," he said, adding that GM and partners like Honda may have to "dig deep into their pockets" to fund the unit for the time being.
SoftBank has its own internal problems to deal with.
The value of marquee companies in the tech investor's portfolio have tumbled, hit by China's clampdown on tech companies, the prospect of higher interest rates and war in Ukraine.
"We will definitely be selling a good chunk of assets," SoftBank chief executive Masayoshi Son said last month, as he pivots from the collapse of the sale of chip designer Arm to a plan to list it in the US.
SoftBank declined to comment on the Cruise exit.
"GM is leveraging the strength of its balance sheet to capitalise on the opportunity to increase its equity investment in Cruise and advance our integrated autonomous vehicle strategy," Mary Barra, chief executive of GM, said in a statement.
chief executive of General Motors
Kyle Vogt, chief executive and co-founder of Cruise, said in a series of tweets that the company would begin allowing employees to sell vested shares to GM once a quarter in an effort to give financial flexibility to employees.
Going public would be "a major distraction, especially right now", he said, adding he wanted the company focused on scaling up the driverless ride-hail service launched in San Francisco.
In December, GM announced that Dan Ammann, then chief executive of Cruise, was abruptly leaving the company. One person briefed on the matter said he was dismissed, while another source said he and GM disagreed over when to take Cruise public.
Ms Barra previously downplayed the need for a quick Cruise public offering.
GM spokesman David Caldwell said the latest deal showed GM's belief in Cruise and simplified the ownership structure. He said that other shareholders in Cruise including Microsoft, Walmart and Honda, had technology partnerships, such as a delivery project with Walmart.
