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German car giants pay £2bn for Nokia’s Here mapping service

Posted in Automobiles4 days ago • Written by rockingpritamsahaComments Off on German car giants pay £2bn for Nokia’s Here mapping service

Three German carmakers have put their rivalries aside by teaming up to acquire a €2.8bn (£2bn) mapping business from Nokia, as they attempt to avoid being outsmarted by technology groups in the race to cash in on the driverless car revolution.

Amid speculation that the likes of Uber, Amazon and Apple were preparing bids, Nokia, the Finnish communications group, agreed a deal to sell its Here unit to the consortium of Audi, BMW and Daimler, the Mercedes owner.

The business is said to be one of the biggest and most valuable mapping assets to come to market in recent years. Its significance to the German carmakers is all the greater because of the way the driving experience is being transformed to become, in some cases, fully automated.

“The car companies have been a bit slow off the mark in this area but this is an attempt to keep the technology in-house rather than let the Googles and Apples make all the running,” said David Bailey, professor of industry at Aston Business School in Birmingham. “There are more and more autonomous features being developed all the time and the technology is transforming the industry.”

Although some basic navigation systems such as satnav have been hit by the arrival of services such as Google Maps, which is free to use, the new generation of mapping tools are sophisticated enough to assist automated driving.

Despite the rise of Google Maps, the number of cars fitted with navigation systems is growing fast. In 2014, nearly 17m vehicles worldwide were produced with navigation systems. By 2021, that number is expected to increase to more than 25m, according to IHS, an automotive industry consultancy.

Bailey said a range of suppliers and software providers are lining up to offer driver assistance features, with some analysts suggesting the market will grow from about $6bn now to some $25bn by 2020, and more than $50bn by 2025.

Kevin Hamlin, a senior analyst at IHS, said the three rival car manufacturers had joined forces in order to stay in the game: “It’s all about the battle for data, . The car companies are being proactive so that when we get to autonomous vehicles they do not have to rely on Google or somebody else in Silicon Valley. They will already have their own service provider and will control the data.”

The three companies have said they will continue to license the mapping services and data to other car groups, as happens now.

The US investment bank Morgan Stanley has suggested that driverless vehicles will go on sale by the end of the decade, at first costing about $10,000 more than conventional cars. Manufacturers, including the German trio leading the Here deal, will be hoping it is the car industry, rather than technology suppliers, that leads the motoring revolution.

Supporters of driverless cars say they could make roads safer and less congested, but sceptics argue they could be less safe and vulnerable to hackers.

The future of Here, which employs about 6,500 staff, had been up in the air since April, when Nokia said it was undergoing a strategic review of the business. The company is in the process of completing a $16.6bn deal to buy French telecommunications firm Alcatel-Lucent, which will see the group gradually shift away from consumer electronics to telecoms infrastructure.

In 2014, Here generated €971m (£682m) in sales but made a €1.2bn operating loss due to a large goodwill impairment.

Nokia chief executive, Rajeev Suri, said the deal represented the latest stage of the company’s transformation. He said Here’s focus would be on developing mapping as well as services that will enable new driver experiences, including highly automated driving.

Here’s president, Sean Fernback, said the new ownership structure will “allow us to accelerate our strategy, further scale our business and fulfil our intent to become the leading location cloud company across industries”.

The purchasing consortium will hope the deal puts these three carmakers, at least, back in the driving seat in the car industry revolution.

Test drivers: racing to build the car of the future

The Here deal represents Audi, BMW and Daimler’s fightback against a tech sector that is encroaching on carmakers’ territory. But the German trio are taking on businesses that have considerable cash resources and are not restricted by the need to develop conventional vehicles at the same time.