Daimler, BMW and Audi have long cultivated one of the fiercest rivalries in corporate Germany. Now the luxury car makers want to share a ride. They are jointly bidding for the HERE mapping division of Nokia.
The Finnish phone company was flourishing when it bought what was then called Navteq in 2008. Now Nokia HERE is a surplus asset. The German car consortium has offered euro 2.5 to 3 billion ($2.8 billion-$3.3 billion) for it, sources told Reuters. Rivals may include US taxi app Uber and Chinese internet giant Baidu.
The interest might look puzzling, as HERE's track record has been patchy. While eking out an operating margin of 8.3 per cent in the first half of 2015, it generated heavy losses for the previous three years. Revenue for 2014 was 12 per cent below the 2012 level, as the rise of smartphones has dented demand for handheld navigation devices. Yet the reported German bid is at least 2.6 times last year's sales, a 17 per cent premium on the ratio of more profitable listed rival TomTom.
HERE's attraction is not in the here and now. The company's high-definition digital maps, designed to be used by machines rather than humans, are a key technology needed for driverless cars. And the German premium brands want to drive the charge to tomorrow's autonomous driving.
Such vehicles need the highest level of three-dimensional cartographic information. Each spot on HERE's maps has up to 300 different location attributes, including real-time data about traffic, parking and weather, collected at an annual cost of euro 500 million. Potential competitors will struggle to collect and integrate that much data.
There are only three contenders: HERE, and TomTom and Google Maps. HERE is in the lead in Europe and North America. Four out of five in-car navigation systems use its maps. The German carmakers don't want it to fall into the hands of a cash-rich and potentially wayward internet start-up. With net cash of euro 47 billion between them, the three rivals can easily afford to pay up for some additional commercial safety.
If the Germans win HERE, they will have to avoid governance gridlock. But even if they have to run it at arm's length, they could gain a valuable digital edge.
