Three of Germany’s biggest car makers – BMW, Audi and Daimler – said Monday that were buying Nokia’s HERE digital mapping service for €2.8 billion ($3 billion) in a move to counter growing intrusions from software giants Google and Apple.
The German automaker consortium’s purchase is a step towards producing intelligent cars and safeguarding the service for the industry and fighting Silicon Valley software makers that are beginning to move into the auto business.
HERE uses data provided by vehicles, devices and infrastructure to build high-definition maps and links them with cloud technology to provide real-time information.
Such maps will be critical for the the car industry in the future and real-time information will enable autonomous cars to avoid collisions and calculate alternative routes in case of heavy traffic or accidents.
“HERE will play a key role in the digital revolution of mobility.”
“HERE will play a key role in the digital revolution of mobility,” said BMW’s chief executive officer Harald Krüger. Combining data with real time information will make driving safer and simpler in the future, he said.
Dieter Zetsche, chief executive of Daimler, called the high-precision maps “a decisive building block for the future of mobility.”
Autonomous and connected car services could become a $50 billion market, analysts at Exane BNP Paribas have estimated, according to Reuters.
HERE was initially a Berlin-based startup in 1999 and was bought by Nokia in 2006. It grew rapidly when Nokia bought Navteq and now has 6,454 employees, many still in Berlin. Its customers include Microsoft, Samsung and SAP.
If approved by the cartel authorities and pending shareholder approval, the transaction will go ahead in the first quarter of 2016. Nokia expects to receive net proceeds of €2.5 billion and book a profit of €1 billion. The three carmakers took on liabilities of €300 million.
Analysts expect HERE to achieve revenues of €1.1 billion this year, according to Boerse Online, a financial website.
HERE posted an operating profit of €28 million for the first half of 2015. For the full year of 2014, HERE posted an operating loss of €1,241 million, including a €1,209 million charge for the impairment of goodwill.
The German carmakers will share the mapping service equally in a rare move to cooperate and prevent HERE from being bought by Google and other internet companies. By owning the service, the car companies hope to prevent customers from moving to transport services provided by Google, Apple and others in the future.
After Nokia announced the plan to divest HERE, others interested in the service ranged from a bidding group including U.S.-based online taxi and ride-sharing service Uber with Baidu, an Internet company from China. Another included Tencent Holdings, a services company, together with Navinfo, a map maker, according to Reuters.
“All carmakers are working toward providing amazing, new connected services, and only by collaborating and sharing data can we reach the critical mass to make real-time map updates a reality. No single carmaker can do it by themselves,” HERE’s blog said. In the future, the consortium members will be “investors, customers and suppliers of data,” the blog noted.
“Our environment is constantly changing. That’s why the information in digital maps has to be continually updated so that maximum utility can be offered,” said Rupert Stadler, Audi’s chairman of the management board.
Mr. Stadler called high-precision cameras and sensors installed in modern cars “the digital eyes for updating mobility data and maps; in this way, information such as speed limits or critical driving situations are already recognized today.”
All data gained will be processed in compliance with strict data-protection rules, Mr. Stadler said.
Four out of five cars in Europe currently use Nokia’s HERE service. The carmakers underlined that in the future, the service will be available for all customers in the car sector and other industries.
“The acquisition is intended to secure the long-term availability of HERE’s products and services as an open, independent and value creating platform for cloud-based maps and other mobility services,” Daimler said in a statement on its website.
“For the automotive industry this is the basis for new assistance systems and ultimately fully autonomous driving. Extremely precise digital maps will be used in combination with real-time vehicle data in order to increase road safety and to facilitate innovative new products and services. On the basis of the shared raw data, all automobile manufacturers can offer their customers differentiated and brand-specific services,” Daimler’s statement said.
The market is expected to grow significantly. According to forecasts by IHS Global, there will be 11.8 million new autonomous vehicle sales in 2035. By 2022, more than 82 million vehicles will be sold with telematics.
“A reduction in independent, global providers of this type of information would likely see higher price points which may force companies to invest in proprietary systems, in turn slowing the development and deployment of new technologies. Ensuring availability to the automotive industry would help avoid disrupting that development,” analysts at IHS wrote.
The consortium model means the carmakers can continue to develop the service and create a strategic resource that may become a global standard.
“This gives the industry a unique opportunity to rally around specifications or processes that could in fact hasten the onset of a connected and automated future mobility ecosystem. Possibly the most important aspect is that the consortium will also own their own data, thus not having to figure out who controls customer data the service provider or the OEM,” the IHS analysts wrote.
“The acquisition by Audi, BMW and Daimler poses an interesting opportunity of how an industry collective will share a strategic resource with competitors. The most likely answer is an industry consortium supported by an initial fee, as well as an annual fee for both membership and to support ongoing costs in R&D, collection and maintenance of high definition maps in exchange for open access to the maps provided by the consortium. Those not part of the consortium are expected to pay a normal licensing fee as they would today,” the analysts wrote.
Audi’s and Daimler’s share prices rose slightly on Monday morning following the news.
Others were more cautious following the deal. “There’s still a risk that the three won’t manage to work smoothly together,” said Ferdinand Dudenhöffer, head of the Center Automotive Research (CAR) at the University of Duisburg-Essen in Germany.
After selling HERE, and following the sale of its mobile phone services to Microsoft last year, Nokia will focus on integrating Alcatel-Lucent to become a network technology and services company.
“With this step we complete the latest stage of Nokia’s transformation. We integrated the former Nokia Siemens Networks, divested our Devices & Services business, and have now reached agreement on a transaction for HERE that we believe is the best path forward for our shareholders, as well as the customers and employees of HERE,” Rajeev Suri, Nokia’s chief executive officer, said in a statement.
Video: What HERE means.
Allison Williams is deputy editor in chief of Handelsblatt Global Edition. To contact the author: email@example.com