Toyota to Invest $400M in Self-Driving Start-Up Pony.ai

Zacks Equity Research

Toyota Motor Corporation TM recently announced plans to invest $400 million into Pony.ai, a self-driving car start-up. This marks the company’s biggest investment in an autonomous driving company based in China.

Reportedly, Pony.ai has raised $462 million in a Series B funding round, out of which $400 million comes from Toyota. The latest fundraising values Pony.ai at slightly more than $3 billion.

The new funding will benefit the start-up’s robotaxi operations and technology development in the future. The firm focuses on reaching ‘Level 4’, or fully autonomous standards, in which the vehicle can perform all aspects of driving without any human intervention in most circumstances.

Toyota already supports Pony.ai and in 2019, the two companies started a pilot program to test self-driving vehicles in China. A range of mobility products and services are planned to be ‘co-developed’ by the businesses, going forward.

Moreover, Toyota is planning to offer a limited ride-hailing pilot at the 2020 Summer Olympics in China. The cars are expected to be equipped with Toyota's ‘chauffeur’ software, which is based on full autonomy, where the human is effectively eliminated from the driving equation, either wholly in all environments or within a restricted driving domain. Toyota also has a second product called ‘Guardian’, which is essentially an advanced driver-assist system.

In 2019, Toyota invested in Recogni Inc. and May Mobility for self-driving shuttle buses. It also announced its partnership with Softbank Group in March 2019 to invest in the autonomous vehicle division of the ride-hailing provider — Uber Technologies, Inc. UBER. In 2018, Toyota spent $500 million in Uber’s autonomous division for the development of self-driving cars for the first time. The company also provided automated safety features for Uber’s autonomous driving system. The combined technology will be used in Toyota’s Sienna minivans that will be deployed on Uber’s ride-hailing network in 2021.

Shares of the company have gained 9.2% in the past year compared with the industry’s rise of 0.2%.

For fiscal 2020, Toyota’s forecast of consolidated vehicle sales of 8.95 million units remains unchanged. The company expects consolidated net revenues, operating income and net income to be ¥29.5 trillion, ¥2.5 trillion and ¥2.35 trillion, respectively.

Zacks Rank & Stocks to Consider

Toyota currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector are SPX Corporation SPXC and Fox Factory Holding Corp. FOXF, both carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

SPX has an expected earnings growth rate of 6.52% for 2020. The stock has rallied 21.8% in the past year.

Fox Factory has an estimated earnings growth rate of 9.67% for the ongoing year. The company’s shares have gained 2.1% in a year’s time.

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