German carmakers buy Nokia maps to fend off digital rivals

German carmakers BMW, Audi and Mercedes will hold equal stakes in Nokia's map service HERE, paying about 2.5 billion euros (S$4.2 billion) each to purchase the business.
German carmakers BMW, Audi and Mercedes will hold equal stakes in Nokia's map service HERE, paying about 2.5 billion euros (S$4.2 billion) each to purchase the business. PHOTO: AFP

FRANKFURT (REUTERS) - German carmakers BMW, Audi and Mercedes, will pay around 2.5 billion euros (S$4.2 billion) to buy Nokia's maps business, beating out high-tech rivals for location services seen as key to the future of self-driving cars.

Germany's three premium carmakers joined forces and will hold equal stakes in the business, known as HERE, clubbing together to keep the assets from falling into the hands of Internet rivals in Silicon Valley or China.

The deal has an enterprise value of 2.8 billion euros, including liabilities worth nearly 300 million euros, for which Nokia will compensate the carmakers, the Finnish company said on Monday. The transaction is likely to close in the first quarter of 2016.

The deal allows the auto makers to offer new premium features, like autonomous driving, in their luxury cars, shaking up the pecking order between car makers, their parts suppliers and software rivals like Uber, Google or Apple.

"With the joint acquisition of HERE, we want to secure the independence of this central service for all vehicle manufacturers, suppliers and customers in other industries,"said Chief Executive Dieter Zetsche of Daimler, which invented the motor car in 1886.

But it is unclear how other HERE customers, including rival carmakers, may respond to Germany's carmakers owning map technology, which many in the auto, Internet and logistics industries see as key to their own strategies.

"There is a risk that the other automakers will be pushed further into the arms of Google," said Richard Windsor an independent financial analyst who tracks major tech players.

HERE's primary competitor is Google Maps.

Intelligent mapping systems like HERE's are the basis on which self-driving cars linked to wireless networks can perform functions such as recalculating a route to the nearest electric charging station or around a traffic jam or accident.

They are also used in everything from consumer smartphone navigation to local transport services.

At a later stage, the carmakers will invite private equity firm General Atlantic to join the consortium as an investor and potential mediator, two sources familiar with the matter said. The size of the stake has not yet been decided but could be up to a third of the business.

HERE is the leading supplier of digital maps for most of the world's top carmakers, accounting for half its expected US$1.1 billion (S$1.65 billion) revenues in 2015.

It also supplies mapping services to Internet customers including Amazon, Yahoo and Baidu.