General Motors Co. (NYSE: GM) paid $1 billion for self-driving vehicle startup Cruise Automation in 2016. Tuesday morning in a statement posted on Twitter, Cruise announced that it had received a new investment of $1.15 billion from a group of institutional investors advised by T. Rowe Price Associates. Current investors GM, Softbank and Honda also participated in the new funding round.
In its announcement, Cruise said it raised $7.25 billion in new capital last year, including $2.25 billion from Softbank and $750 million from Honda, along with a promise of $2 billion more from Honda over a 12-year period.
The latest investment raises Cruise’s post-money valuation to $19 billion.
Cruise CEO Dan Amman said:
Developing and deploying self-driving vehicles at massive scale is the engineering challenge of our generation. Having deep resources to draw on as we pursue our mission is a critical competitive advantage.
Amman could have been speaking directly to Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk, who has promised to have a million “robo-taxis” on the road by 2020. Tesla also had to raise $3.4 billion shortly after Musk’s declaration in order to keep up with its big plans for expanding its manufacturing facilities and launching its self-driving vehicles. The company’s big advantage, according to Musk, is that Tesla’s vehicles are already equipped with the hardware needed to make full self-driving possible with just the flip of a software switch (and a payment of $5,000 for the company’s self-driving option at the time of purchase or $7,000 after delivery).
Musk’s pronouncement was greeted with skepticism given his track record of overpromising and underdelivering. But Tesla is not the only other company working on self-driving vehicles. Waymo, one of Alphabet Inc.’s (NASDAQ: GOOGL) moonshots, was rumored in March to be willing to sell as much as 20% of the self-driving car company at a valuation “at least several times” higher than Cruise’s then-$15 billion valuation. Waymo has been valued at between $25 billion and $45 billion by analysts, with Morgan Stanley suggesting the company could someday be worth $175 billion, more than any current automaker except Toyota.
The race for a fully self-driving vehicle has a lot of competitors but Waymo, Tesla and Cruise are probably the furthest along in the development cycle. Overcoming drivers’ concerns regarding the safety of the vehicles may be the biggest hurdle any of the autonomous carmakers face. They all appear to be treating self-driving vehicles like a new technology that will follow the usual adoption rate of virtually all new technologies.
But unless you drop a plugged-in laptop into your bath while you’re in full-soak mode, that laptop is unlikely to kill you. A motor vehicle, autonomous or not, can do so in a heartbeat. People understand the difference. It’s not entirely clear that the technology developers of self-driving vehicles do.