German auto manufacturers Audi, BMW and Daimler have acquired the Finnish company Nokia’s high-precision digital mapping service Here for €2.8 billion ($3.1 billion).
The acquisition is a sign of the strategic importance the auto industry places on digital services. The transaction is subject to the approval of the relevant antitrust authorities and is expected to close in the first quarter of 2016.
Mikael Rautanen, an analyst with Inderes Equity Research, says traditional car manufacturers are not good at software and digital services, so they need to acquire such assets in order to compete with the likes of Google, for example. “As the digital revolution shakes the automotive industry, they will need to protect their position against the competition coming from Silicon Valley,” says Rautanen. “Differentiation from competition will be more in the services and software you can provide for the customer.”
Rautanen says the price paid by the three automobile makers for Here may slightly undervalue the company. He believes the digital mapper has significant future earnings growth potential and high strategic value “in the war of ecosystems.”
By combining mapping information with vehicle data, auto manufacturers hope to pave the way for the development of fully autonomous vehicles. With future opportunities in high-definition mapping seemingly unlimited, Rautanen believes German auto manufacturers will invest heavily in this space. “Under Nokia’s ownership, Here’s strategy had recently focused more on short-term profitability. That will change under the new owners, and they will put more money into future investments.”
Max-Morten Borgmann, a business and finance communications spokesperson at BMW, confirmed that the acquisition was intended to secure the long-term availability of Here’s products and services as an open, independent and value-creating platform. “The management of Here will continue to be independent, with the goal of moving the Here business case forward as a platform, open to all customers. The consortium will not interfere in operational business,” he stated.
Jeremy Carlson, a senior analyst for IHS Automotive Consulting and Advisory Services, says ensuring availability to the automotive industry of independent, global providers of digital mapping information is essential for the development and deployment of new technologies.
“A global platform in Here,” states Carlson, “may establish a de facto standard, giving 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.”
BMW is confronting Google on another front. The carmaker is checking whether Google’s plan to form a holding company called Alphabet violates one of the automaker’s trademarks. A BMW fleet-management unit is named Alphabet.