When it comes to startup investment, automakers are still going full speed ahead.
From ride-hailing apps to driverless car technology, transportation startups have attracted unprecedented sums of investment capital from auto manufacturers in recent years. In the past few quarters, that trend has been accelerating.
An analysis of Crunchbase data shows that since the beginning of 2019, the world’s largest car and truck manufacturers have led financing rounds valued at more than $6 billion. Over that period, they’ve participated in more than 50 deals for several million dollars and up, indicating an expanded willingness to pump significant sums into rounds.
“It has been a continuation of the trends for many of the automakers that have been particularly active over the past few years,” said Chris Stallman, a partner at Detroit-based transport venture firm Fontinalis Partners. “In 2019 and 2020, however, it has been interesting to see a few automakers—particularly those in Asia—aggressively ramping up their innovation efforts.”
Below, we take a more detailed look at where Big Auto is putting its capital, which companies are spending the most and where the current investment path is headed.
Hot Sectors, Big Rounds
First, let’s look at where the money’s going. The sectors driving away with the largest sums of automaker capital include autonomous driving technology, electric cars, batteries and ride-hailing.
We break out the largest funding recipients in Big Auto-led rounds in the chart below. (See full list of automaker-led investments since 2019 here.)
For the most part, the same subsectors have been attracting automaker interest for years, but the funding dynamics have changed some in recent quarters.
In particular, we’re seeing more partnerships and joint investments involving multiple automakers. Examples include Honda’s participation in a $1.15 billion May round for GM’s self-driving unit, Cruise, and Volkswagen’s $2.6 billion round for Ford-backed Argo AI. Even longtime rivals Daimler and BMW are teaming up by launching a joint venture for mobility services.
“I’m not sure 5 to 10 years ago we would have imagined Ford and Volkswagen coming together to collaborate on electric and autonomous vehicles, or Daimler and BMW’s collaboration on mobility services,” Stallman said.
However, as the true cost of launching electric and autonomous vehicles—and competing against Uber and Lyft on mobility services—has come into greater clarity, these partnerships make quite a bit of sense.
Another broad trend is a move toward components developers. The years 2016 to 2018 were active for acquiring full-stack autonomous vehicle technology companies, Stallman noted. But more recently, automakers are turning their attention to enabling and component technologies that align with in-house architectures. This isn’t broadly reflected in the largest deals chart above, but looking at a list of all automaker-backed rounds since 2019, it’s a more visible trend.
Most Active Investors
There’s wide variation among automakers in startup round counts. Several are, on average, participating in more than one sizable deal a month. Others are more sporadic.
Below, we take a look at the most active by deal count since the beginning of last year:
One key takeaway is that we’re seeing more startup capital coming from large auto manufacturers in Asia.
Hyundai in particular has upped its game. The Korean auto giant wasn’t much involved in the startup space before 2017, according to Crunchbase data. In the last few years, however, the company has backed at least 35 rounds, including 18 since the beginning of 2019.
Toyota, meanwhile, tied with BMW as the second most active investor. The count for Toyota included several supergiant rounds of $100 million.
It’s also worth pointing out companies not in the rankings. Tesla, for instance, hasn’t been doing much startup investing, presumably preferring to innovate in-house. Fiat Chrysler is also not active in venture-stage investing, nor are France’s PSA Group or Japan’s Suzuki and Mazda.
The Road Ahead
While automakers did a lot of startup investing in 2019, they didn’t do much acquiring.
There were a few deals: Honda bought Drivemode, a Silicon Valley developer of smartphone apps for drivers, in its first startup acquisition to date; Tesla snapped up DeepScale, a computer vision startup; and PSA Group acquired TravelCar, a platform for car rentals and parking it had previously backed.
Big Auto is, however, increasingly competing with Big Tech in the transport space. Just last week, for instance, Apple bought Xnor.ai, a developer of technology with applications in the automotive space, and over the summer picked up Drive.ai, a developer of autonomous driving software. Google also has made some transport acquisitions, as have Uber and other ride-hailing players.
Interest from Big Tech is a concern, as the most valuable technology companies are worth many multiples more than the biggest automakers, making M&A an unlevel playing field.
That said, automakers’ investment activity shows they’re serious about keeping abreast of innovation in spaces that impact them by putting more money than ever toward stakes in startups, even if they’re not buying them whole.