German carmakers BMW, Audi and Daimler (who owns Mercedes Benz), will pay around 2.5 billion euros (A$3.7 billion) to buy Nokia’s maps business, beating out high-tech rivals for location services seen as key to the future of self-driving vehicles.
The HERE platform is in the midst of developing a location cloud that harnesses data generated by vehicles, devices, and infrastructure to deliver real-time, predictive and personalized location services.
Germany’s three premium carmakers will hold equal stakes in the business, known as HERE, clubbing together to keep the assets away from Internet rivals such as Uber of Silicon Valley and China’s Baidu and Tencent.
The deal has an enterprise value of 2.8 billion euros, including liabilities of nearly 300 million euros, for which Nokia will compensate the carmakers. The transaction is expected to close in early 2016.
The purchase allows automakers to offer new premium features, like autonomous driving, in luxury cars, shaking up the pecking order between car makers, their parts suppliers and software rivals like Uber, Google or Apple.
“With the joint acquisition of HERE, we want to secure the independence of this central service for all vehicle manufacturers, suppliers and customers in other industries,” says chief executive Dieter Zetsche of Daimler.
It remains to be seen how other HERE customers, including rival carmakers, may respond to Germany’s carmakers owning map technology, which many in the automotive, Internet and logistics industries see as key to their own strategies.
“There is a risk that the other automakers will be pushed further into the arms of Google,” Richard Windsor an independent financial analyst who tracks major tech players told Reuters.
Intelligent mapping systems like HERE’s are the basis on which self-driving cars linked to wireless networks can perform functions such as recalculating a route to the nearest electric charging station or around a traffic jam or accident. They are also used in everything from consumer smartphone navigation to local transport services.
HERE is the leading supplier of digital maps for most of the world’s top carmakers, who account for half its expected roughly $1 billion revenues in 2015.
Nokia competes with rival Dutch mapping firm TomTom, which has also begun to retool its business to focus on carmakers rather than consumers. TomTom recently teamed up with Bosch, one of the world’s top auto suppliers, to create an alternative platform to HERE for carmakers.
Analysts say the 2.5 billion euros in net proceeds for Nokia was at the low end of market expectations, which were between 2-4 billion euros during the auction process.
It is estimated that self-driving and connected car services could become a $50 billion market, according to analysts at Exane BNP Paribas.
Andreas Tschiesner, head of McKinsey’s automotive division in Germany notes: “The automotive industry is facing a big disruption through connectivity and connected driving technologies. These features will become an important source of differentiation.”
