Technology: Auto ambitions

SoftBank and Didi Chuxing are the anchor investors in Southeast Asia-based ride-hailing platform Grab’s latest round of funding. Their participation underlines two trends: the appetite of the former for exposure to sharing economy companies that have scale, and the latter’s desire to create a global platform. However, the identities of two other investors are perhaps more interesting.

Last week, South Korean automaker Hyundai confirmed it would join the round as part of a broader partnership that will explore initiatives such as the introduction of electric vehicles to Grab’s fleet. The company has already launched car-sharing services featuring its Ioniq Electric model in the US, the Netherlands, and Austria.

Hyundai is the second automaker on Grab’s investor roster. Toyota got involved last year, bringing its own collaborative agenda. This includes analyzing data on driving patterns from the Toyota cars in Grab’s fleet and suggesting how other connected car services on its mobility service platform – such as user-based insurance, financing program, and predictive maintenance – could be used by the company.

Toyota’s investment in Grab will come from its Next Technology Fund, established last year by Toyota Tsusho with a remit to invest $55 million in innovative technologies. The automaker subsequently launched Toyota AI Ventures, a $100 million early-stage vehicle under the Toyota Research Institute. It focuses on artificial intelligence (AI) investments including autonomous mobility, robotics, data and cloud.

The company is not alone in creating funds intended to tap industry disruption. A landmark announcement last week came from Renault, Nissan Motor and Mitsubishi Motors, which together pledged to invest $1 billion in advanced car technologies through Alliance Ventures. Areas of interest include vehicle electrification, autonomous systems, connectivity, batteries, and AI.

However, a day earlier, Chinese internet giant Baidu and Singapore-based Asia Mobility Industries revealed plans to deploy $200 million in advanced transportation investments in Southeast Asia. And last month Cathay Capital Private Equity launched a RMB1.5 billion ($227 million) China automotive sector fund with support from Yangtze River Industry Fund and French auto supplier Valeo. It will also target investments in segments such as autonomous driving and internet-connected cars.

Taken together, these initiatives appear to amount to an automotive arms race. The participants fall into three main categories: technology companies armed with extensive research – and some domain expertise – relating to AI that see transportation as a logical sector to put it to work; car-sharing players like Uber that are developing technology capabilities of their own and have fleets in which they can be deployed; and the traditional automakers, keen to mobilize resources so they aren’t left behind.

Asia is an appropriate battleground, given rising vehicle sales in emerging economies and government support. China has already emerged as a target for US cleantech start-ups with ambitions to monetize electric vehicle technologies. The elements of crossover with other user-friendly innovations like autonomous driving and connectivity – based around the concept of the car as an internet platform as opposed to just an automobile – suggest this interest will continue to extend throughout the sector.

From a venture capital and private equity perspective, these developments underpin investment theses. Technology companies and automakers represent valuable strategic partners that can provide follow-on funding for start-ups, help them find short-cuts to commercialization, and perhaps offer an exit route for investors at the end of it. 

The flood of strategic capital into the sector is inevitable and not all of it will be deployed wisely. Chinese smart electric carmaker Nio – formerly known as NextEV – has barely completed its third round of institutional funding but the company already has its own private equity unit.

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• Topics
• Southeast Asia
• Greater China
• Technology
• China
• Singapore
• automobiles
• Softbank
• Didi Chuxing
• TMT