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Data explosion brings Toyota and SoftBank together

Monetizing information key to dominance in next-generation mobility services

SoftBank is a major shareholder in the world’s leading ride-hailing companies, including Uber Technologies of the U.S., Chinese market leader Didi Chuxing, Singapore’s Grab and India’s Ola. 

TOKYO -- The key to success for the tie-up in next-generation mobility services between Toyota Motor and SoftBank Group is the companies' ability to monetize such services by using big data.

The two companies on Oct. 4 announced their agreement to establish Monet Technologies, a joint venture dedicated to the development of self-driving and other emerging services.

The automobile industry is shifting to an age in which vehicles carrying large numbers of sensors are connected in networks, producing massive amounts of data. Whether Toyota and SoftBank can establish dominance in this new world depends on their success in finding viable ways to profit from the data.

"SoftBank will give us the seeds to make mobility services a reality. How much data we can get is the key to making self-driving practical," said Toyota President Akio Toyoda at a news conference on Oct. 4 packed with Japanese and foreign media.

Internet companies and automakers in Europe and the U.S. have taken the lead in the burgeoning field. Toyota's disadvantage has been its delay in building a reliable software development ecosystem. The Japanese automaker is addressing this problem in its tie-up with SoftBank, which invests in a wide range of upstream services and software businesses. 

SoftBank is a major shareholder in the world’s leading ride-hailing companies, including Uber Technologies of the U.S., Chinese market leader Didi Chuxing, Singapore’s Grab and India’s Ola. "These four companies have 90% market share in terms of the number of rides," SoftBank Group CEO Masayoshi Son emphasized at the conference. The data they gather will be a valuable resource for the two companies

Toyota has also invested in Uber and Grab. They are in a separate deal for joint development of a service using a multipurpose self-driving car being developed by Toyota. They are also participating in a joint project for a self-driving bus being developed by Yahoo Japan, a SoftBank subsidiary. SB Drive, a SoftBank subsidiary developing self-driving technology, increased new hires dramatically this summer after the group's tie-up negotiations with Toyota got underway in earnest.

According to a source knowledgeable about the talks, SoftBank seeks Toyota's participation in joint development projects with GM Cruise, a General Motors subsidiary that handles self-driving technology in which SoftBank is an investor. On Oct. 3, Honda Motor announced it will make a $750 million equity investment in GM Cruise. There is a possibility that these companies may eventually form a major alliance to fend off the challenge from Waymo, a Google affiliate that leads in self-driving technology development. At the conference Son said, "This partnership will involve many allies," hinting that other companies could join the autonomous car service project.

Toyota has been working with telecom services companies KDDI and Nippon Telegraph & Telephone on networking between self-driving cars. In this particular deal with Toyota, however, SoftBank will not be acting as a telecom provider but as a fund that invests in various transportation services.

Toyota has a well-established development system and a global network of next-generation cars, in terms of development, management and sales financing of the vehicles themselves.

But even the large business group would not be able to effectively transform a huge amount of potentially useful vehicle-related data into services on its own. To get a leg-up on its rivals, it will be crucial to build a sound platform able to attract software development companies -- just as Apple and Google have done.

In that sense, Toyota lacks experience in providing an environment to promote collaborations with talented startups for developing services such as insurance, advertising and marketing based on positioning data, distribution of content to cars and development of the mobility data market.

Online business specialists, including Amazon, Google and Apple have already begun working on building the framework to distribute data services to self-driving cars. Leading American automakers, such as General Motors, are keen on strategies to build platforms that will make the most of vehicle-related data.

SoftBank, for its part, has a network of car-related services. But it does not the ability to help the companies it invests in to improve their cost structure, for example, in development, maintenance and management of vehicles. 

With its tie-up with Toyota, SoftBank now has access to the skills to increase the value of these businesses. Toyoda said, "While SoftBank has a great ability to find new startups, Toyota’s strong point is on the front line, such as manufacturing and sales."

Son said, "The new Monet Technologies joint venture is just the first step of our partnership, I sincerely hope we will go to the second and third steps."

The two companies have contrasting business styles -- Toyota is more prudent, but SoftBank does not hesitate to take risks. However, the auto industry’s business environment is changing dramatically, and this has created new fields from which the two companies can expect synergies. 

Koji Uchida, chief fund manager at Mitsubishi UFJ Kokusai Asset Management, said, "It is crucial for automakers to have data, for example for autonomous cars, that can be used to add value to their services and to the company itself. Companies that have a vision for the future and are proactive in partnerships will receive higher esteem and are more likely to expand their business, which will enable them to survive in the industry."

Akihide Anzai and Jada Nagumo in Tokyo contributed to this report.

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