Boston’s most promising startup in the burgeoning technology of self-driving cars will be acquired by a major global auto parts supplier, a deal that could hasten the deployment of the technology around the world.
Delphi Automotive will pay at least $400 million to acquire Boston-based nuTonomy, with as much as $50 million in additional payments based on performance.
NuTonomy, which was spun out of the Massachusetts Institute of Technology and headquartered in the Seaport District, will remain based in Boston and continue to operate as a standalone business unit, Delphi chief technology officer Glen De Vos said.
The startup was the first to test self-driving technologies on Boston roads and recently received city approval to begin offering rides to passengers.
The deal with Delphi represents a small degree of consolidation in a new industry that has attracted traditional automotive giants and America’s best-known tech companies, as well as scores of startups like nuTonomy.
And then there’s Delphi, an established auto parts supplier with $16.7 billion in revenue in 2016 and 160,000 employees. Once owned by General Motors, Delphi went bankrupt in 2005, reincorporated in the United Kingdom, and has spent recent years focusing on self-driving technology — including an attention-grabbing move when it sent a driverless car cross-country in 2015.
On its own, nuTonomy — which has about 100 employees — was “limited by scale and speed and bandwidth,” cofounder Karl Iagnemma said. He said the acquisition will help nuTonomy grow because of Delphi’s deep ties into the auto industry and its recent focus on driverless vehicles. It had raised about $20 million.
“They can sell into every [auto manufacturer] globally,” Iagnemma said. “I really believe that the technology at the end of the day drives the space and will determine who has a real opportunity in the market because that’s the necessary condition. But beyond that, the question is, how big of an opportunity can you address. And with Delphi, I see the opportunity as really vast.”
NuTonomy designs software that powers self-driving cars and has said its primary goal is to use the technology for self-driving taxi fleets. It is already doing so in parts of Singapore, in partnership with the popular Asian ride-hailing firm Grab, and has signaled its plans to do so in the United States with Lyft.
Jeremy Carlson, an automotive analyst for research firm IHS in Los Angeles, said the world’s major automakers have long outsourced the development of advanced technologies to top suppliers like Delphi, and self-driving systems will be no exception.
“It’s an incredibly complex area of technology,” Carlson said. “To produce a fully autonomous vehicle requires a lot of different areas of expertise.”
While some auto manufacturers are working to develop driverless platforms, the massive complexity might encourage others to buy self-driving technology from suppliers, rather than develop it themselves, Carlson said.
NuTonomy is not Delphi’s first foray into this market. In 2015, it bought another company that develops driverless software, Pittsburgh-based Ottomatika. De Vos said nuTonomy and Ottomatika will operate as separate business units, but the technology of both companies will ultimately be used to power self-driving vehicles. Iagnemma said integrating the two systems will be “a nice problem to be able to tackle.”
De Vos said Delphi’s existing systems are lacking in areas that nuTonomy is strong in, such as fleet management and deployment. Adding those abilities to Delphi’s portfolio — as well as the brainpower from nuTonomy’s workforce — could accelerate plans to deploy fleets, possibly as early as 2019, De Vos said.
NuTonomy became the first company to test self-driving cars in Boston in January and has so far logged hundreds of miles on the streets of the Seaport District. Boston has sought to become a magnet for the industry, selling the region’s strengths in education and robotics and working with the World Economic Forum to develop driverless policies and strategies. Delphi also received permission from the city to test here earlier this year but until Tuesday had been mostly mum about its plans for Boston.
Bob Davis of Highland Capital, an investor and board member at nuTonomy, said the acquisition should be seen as a good sign for Boston’s role in the driverless industry, even though a local company is no longer fully independent.
“Boston was in a good position, but it had a small little scrappy startup. Now it becomes part of a global powerhouse,” he said.
Another Boston-based driverless startup, Optimus Ride, concurred, saying the acquisition “confirms the strength of the Boston startup ecosystem particularly around autonomous systems, robotics,” and artificial intelligence.Adam Vaccaro can be reached at firstname.lastname@example.org. Follow him on Twitter at @adamtvaccaro.