Honda announced that it will be investing $2.75 billion in GM Cruise, GM’s self-driving car unit. This investment represents a 5.7% stake in the unit. The company will immediately invest $750 million, with an additional $2 billion coming over the next 12 years.

Honda Likes to Invent, Not Invest

Honda has long had a culture that prided itself on inventing things itself. Catalytic converters? Nah, they built the CVCC engine that met 1970s emission standards without one. Variable valve timing? Honda’s VTEC (yo) was a pioneer. Four wheel steering in a car? The 1990s Prelude had that. Hydrogen-powered car? FCX Clarity is your answer.

However, it’s not cheap to develop viable driverless cars, and Honda is at this stage a small player on the global stage, without the resources or scale to go toe-to-toe with GM, Ford, Google, or Uber. Honda, to its credit, realized its limitations and decided that it was not viable to go it alone, so it teamed up with GM.

It’s actually not accurate to say that Honda teamed up with GM, but rather with GM’s mobility arm. GM Cruise is a standalone company founded by GM (and majority owned by GM). However, SoftBank Group, the Japanese conglomerate, invested $2.2B in GM Cruise earlier this year, earning a 19.6% stake in the business.

Not the Only Play

GM Cruise is far from the only player in this space. It’s a bit of a wild west, with unusual alliances, and it’s hard to say who will be left standing when the dust settles. Just a few examples:

• Toyota invested $500 million in Uber to develop self-driving technology, and will provide Uber with Toyota Siennas as a platform for self-driving taxis
• FCA joined a BMW-led consortium that aims to commercialize self-driving vehicles by 2021
• Ford has organized its autonomous-vehicle efforts into a $4 billion subsidiary named Ford Autonomous Vehicles LLC (AVLLC), which has partnered with Argo AI

GM Cruise being a standalone unit, like AVLLC, brings to mind the question of valuation. Both GM and Ford (and their partners) have decided to sequester AV development efforts from the regular design, engineering, and production of traditional vehicles. Doing so allows focus on AV efforts while insulating the growth rate – and valuation – higher than it would be otherwise. Automakers typically have very low valuations relative to earnings compared to tech companies.

Developments in this space are coming quickly. It will be fascinating to see how this rapidly-growing business evolves over the next five years.