Honda Left Waymo for Cruise Automation

Honda-Waymo deal collapsed due to strictly-limited tech access

Collaboration was almost intertwined between Honda and Waymo when both discussed in depth about developing autonomous cars together. The former, however, decided to walk away earlier this year. So in the end, there is no meeting point between the two.

Why did the deal fail? And a few months later Honda chose to partner with GM’s Cruise Automation instead? This time of course the Japanese company feels more familiar with its new ally than with the previous one which is a tech heavyweight.

There are several reasons that caused the synchronization failure with Waymo, with the most pressing one being the competition between the tech company and the car maker that blocked the path towards cooperation. Honda and Waymo were supposed to work together, but at the same time they also compete in developing future cars.

Waymo didn’t want to be open to Honda about its data of autonomous car development. What it wanted was an agreement where Honda would act only as a vehicle supplier, according to people familiar with the matter. In essence, the tech company wanted to be the brain of this project and have Honda as the brawn – a relationship that sounded unappealing to the latter.

Control of technology seems to be something that Waymo can’t share with its partners, and Honda is no exception, of course. On the other hand, the Japanese automaker wants to maintain a degree of control, so it couldn’t just be an EV supplier.

Waymo needs more power for its self-driving system, and it thought Honda might be able to help meet the need. The talks started in late 2016, when the latter revealed to the former its plan to build a Tesla Model 3-competing electric car. Apparently, Waymo was concerned about Honda’s progerss towards its goal. And by the end of 2017, the Japanese auto giant began going separate way.

Honda is pretty much a beginner in the EV area. It was looking for good battery units to power its upcoming car. GM has what Honda needs and was ready to cooperate in developing future batteries. So the two reached a deal in June that would allow the Japanese company to use GM’s battery technology. This is a mutually beneficial relationship, which gives Honda access to quality batteries while at the same time its partnership with GM could help both companies reduce costs.

It didn’t take long until the two started discussing about working together on self-driving cars, too. In 2017, GM had shown what it self-driving vehicles could do. The project gained credibility in May 2018 when Japan’s SoftBank invested $2.25 billion in it.

Honda employees had been visiting San Francisco for the past few months, to learn more about Cruise Automation’s technology. The company’s engineers got to check out closely and observe how Cruise’s self-driving system works. Such access was completely denied when Honda was with Waymo.

GM’s openness has led to a deal in which Honda hands the Detroit automaker $2.75 billion in exchange for a 5.7 percent stake in Cruise, giving the company a value of around $14.5 billion, which is great for GM. As for Honda, it now has a reliable ally on EV batteries.

The previous deal that collapsed is not a loss for Waymo, although the tech company and Honda refused to comment on the matter. Meanwhile, the new deal with Cruise was actually a continuation of pre-existing cooperation with the Japanese automaker on new technologies, according to Cruise’s CEO Kyle Vogt.

If Honda was to stay with Waymo, it would never get a stake as the parent company Alphabet is not interested in selling any. The American conglomerate has other businesses like Verily unit that focuses on health-care technology and has sold interests. In 2017, the Google’s sister-company received a $800 million investment from Singapore-based Temasek.

Let’s say Waymo was willing to sell a stake to Honda, still it would be a very expensive purchase for the automaker. That’s because the tech company has a value well above $100 billion, making even a little investment very costly. Besides, Alphabet also has over $100 billion in cash, which means that it is fully capable of funding Waymo alone without outside support.

For Honda, partnering with GM is an important step towards autonomy. The investment is also shared, so things are more affordable and lighter to handle. Thanks to this good relationship Cruise gains the cash it needs to further push its technology forward. New possibilities are also open for it to access the Japanese market for ridesharing and transport services.

Despite the failure of the recent talks, Honda could still establish other type of collaboration with Waymo in the future. The tech company already has a partnership with Fiat Chrysler Automobiles (FCA) that lets it inject its autonomous driving technology into the Chrysler Pacifica minivans. It also has a similar deal involving Jaguar’s I-Pace electric SUV. At least 80,000 EVs have been supplied by those automakers to Waymo, which does the tech-installation job itself.

Waymo is in discussions with FCA about licensing its self-driving system so the automaker can sell autonomous cars to private buyers. Such a deal is not expected to be reached in the near future though.

In contrast to Waymo, Cruise is more open to its associates. It’s even ready to accept more carmakers as new allies. According to Vogt, the company is “evolving rapidly” and “will talk to any partner”.