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General Motors and Microsoft are making an investment of $2 billion in self-driving car startup Cruise LLC in a historic mega deal that will bring together software giant’s cloud and edge-computing capabilities to the venture. Shares of GM was bullish due to the effect of the news.
Cruise officially declared in a statement that the additional investments will increase Cruise’s post-investment valuation to an estimated $30 billion, up from previous $19 billion after T. Rowe Price Associates investment in Cruise in 2019. Honda Motor and other institutional investors are also believed to be participating in the new round.
The partnership with Microsoft will help Cruise to compete in the race to commercialise autonomous driving with Waymo, which has access to the software capabilities of parent Alphabet. Microsoft in return will get a potentially lucrative new cloud-computing customer as self-driving cars move closer to mass-market deployment.
Although, Cruise was forced to push back on its overly aggressive goal for deployment by 2019, but efforts to develop self-driving vehicles have picked up the required pace in recent months. California has approved more robotaxi testing on public roads and has also granted its first commercial permit for autonomous-vehicle deliveries to startup Nuro Inc last month.
The news of the collaboration skyrocketed GM’s stock to new highs, betting heavily on next-generation auto technology such as self-driving and electric vehicles. The shares prices of GM made a jump of 9.8% to close at a record $54.84 in New York trading on Tuesday. Meanwhile Microsoft shares rose 1.8% to $216.44.
Microsoft’s Azure cloud is trying to get more customers for edge-computing services which collect and analyse data from sensors without having to transmit the data back to a central server farm. Self-driving car technology depend on an array of sensors and artificial intelligence algorithms, so Cruise could become an important revenue source for Microsoft.
Cruise will also become a customer for Microsoft’s more standard array of cloud services for storing information and running applications in its Azure data centers. Microsoft isn’t working on self-driving cars itself (unlike other software companies such as Alphabet and Apple) but is aiming to sell its software to car companies.
Cruise will make use of Azure to manage its self-driving vehicle network by handling data and mapping. In addition it will also enable driverless cars to communicate with Cruise’s back office and customer-facing app for ride-hailing. It is a vital component for a planned commercial robotaxi service.
“Our mission to bring safer, better and more affordable transportation to everyone isn’t just a tech race - it’s also a trust race,” said Dan Ammann, chief executive officer of Cruise. “Microsoft, as the gold standard in the trustworthy democratization of technology, will be a force multiplier for us as we commercialize our fleet of self-driving, all-electric, shared vehicles.”
Cruise is planning to charge fares for its service. The next step would be to get approval from California.
Sam Abuelsamid, principal research analyst with Guidehouse Insights said that the deal is a big boost for Cruise because it brings in more cash at a time when some autonomy startups have been failing due to lack of funding. Adding further he said that Microsoft’s cloud platform is an essential piece for Cruise to successfully manage a commercial fleet.
“Having a robust cloud platform will be key to commercializing this technology,” Abuelsamid told in a telephonic interview. “You have to have the ability to dispatch and monitor all of the fleet.”
Some of the failures being due to lack of funding are autonomous trucking startup Starsky Robotics which shut down due to lack of cash, and Zoox Inc. sold to Amazon.com Inc. after not being able to secure a new round of funding.
“A handful of front-runner AV companies that look most likely to win are attracting substantially all of the best human capital and a huge chunk of the financial capital, tweeted Cruise President and Chief Technical Officer Kyle Vogt. “That is how a company without millions of customers can be valued at $30 billion. We’ve made some incredible progress towards this vision, but there is much left to do. Back to work!”
In November, Cruise partnered with Walmart Inc. for an initial experiment using driverless vehicles for deliveries of retail orders. However Walmart has similar tests with Cruise rivals Waymo and Nuro.
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