Here's why GM is buying an autonomous driving software firm

cruise automation gm

General Motors President Dan Ammann (right) with Cruise Automation co-founders Kyle Vogt (center) and Daniel Kan (left).

Credit: GM

GM's $1B purchase of Cruise Automation is a sign of things to come with other companies

General Motors announced Friday that it's acquiring Cruise Automation for Cruise's deep software talent and rapid development capability -- a move designed to further accelerate GM's development of autonomous vehicle technology.

Over the past two months, GM has entered into a $500 million alliance with ride-sharing company Lyft; formed Maven -- its personal mobility brand for car-sharing fleets in many U.S. cities -- and established a separate unit for autonomous vehicle development.

GM and Lyft GM

GM President Dan Ammann (center) with Lyft Inc. co-founders John Zimmer (right) and Logan Green (left).

"This acquisition announcement clearly shows that GM is serious about developing the technology and controlling its own path to self-driving and driverless vehicles," said Egil Juliussen, research director for IHS Automotive.

While GM did not disclose the financial details of the Cruise acquisition, reports estimated the purchase to be in the $1 billion range.

Founded in 2013, Cruise sells an aftermarket product that is positioned as a highway autopilot, according to IHS Automotive.

Vehicles using Cruise's software cannot automatically changes lanes, but the technology does work at low speed and highway speed, meaning it's classified between Level 2 and Level 3 in the National Highway Traffic Safety Administration's levels of autonomous driving.

The NHTSA's Level 3 includes limited self-driving automation and allows a driver to cede full control of all safety-critical functions under certain traffic or environmental conditions; Level 4 indicates a fully autonomous vehicle.

Cruise's software was initially offered by Audi in its A4 and S4 vehicles as a $10,000 option that required installation work by Cruise. The product consisted of a sensor unit on top of the car and a computer in the trunk.

GM's purchase of Cruise is likely to spur other carmakers "to react and determine what their strategy should be," Juliussen said.

Other carmakers are likely to seek to become partners with Google and license Google's self-driving and driverless software technology. Multiple manufacturers are likely to opt for a Google partnership, IHS said.

GM Maven Photo by John F. Martin for General Motors

Maven, GM's personal mobility brand for car-sharing, allows customers to use  smartphone and keyless integration with a vehicle. Maven customers use the app to find and reserve a vehicle by location or  type and unlock the vehicle. The app also enables remote functions such as starting, heating or cooling.

The other possibilities are that carmakers will acquire other start-up companies, such as nuTonomy and Zoox Labs, that are developing self-driving car software or developing a complete self-driving car.

Manufacturers could also rely on their own Tier 1 suppliers to develop the autonomous driving technology, or develop the technology on their own.

"So far, Toyota is going down this path with its $1 billion investment in Toyota Research Institute, which is focusing artificial intelligence for autonomous driving and robotics. Few OEMs have the resources to go down this path," Juliussen said.

Since 2011, BMW, Honda, Hyundai, Mercedes-Benz, Nissan-Renault and Toyota have all opened R&D centers in Silicon Valley.

Earlier this year, Apple hired Doug Betts, a former Fiat-Chrysler executive in charge of global quality, fueling speculation that Apple is working on its own autonomous car.

IHS Automotive has predicted that by 2025 there will be 300,000 self-driving cars and just as many driverless vehicles on the road; by 2030, there will be 2.2 million self-driving and driverless cars on the road; and by 2035, there will be 11 million self-driving and 10 million driverless vehicles in operation.

"The race towards autonomous cars had already been gaining speed and [GM's aquisition] further increases the pace towards adding autonomous features," Juliussen said. "It is likely there will be more acquisitions, cooperation and deals of all kinds in 2016 and beyond."

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