Automotive supplier Delphi has acquired Boston-based self-driving startup nuTonomy for $450 million, the two companies announced on Monday. It’s a significant deal, not just in price, but because it’s one of the first of its kind.
While other self-driving software startups like Cruise, Argo AI and others have opted to sell to an automaker, nuTonomy is one of the first software startups to tie up with an automotive supplier. That means nuTonomy will be a self-driving software supplier to the industry in a way Cruise and Argo, at least initially, are not.
Cruise, acquired by General Motors in 2016, and Argo AI, in which Ford took a majority stake earlier this year, are exclusive providers of self-driving software to those automakers. (Ford has said it would be willing to license out Argo technology after the company got its own cars on the road.)
NuTonomy, on the other hand, is creating a turnkey self-driving platform with Delphi to be licensed to any number of automakers, or even tech companies looking to build out their own cars.
“As an [automaker], I think it may be challenging to sell products to your competitors,” Karl Iagnemma, nuTonomy co-founder, told Recode.
With Delphi, nuTonomy will be able to work with the automakers, transportation service providers and ride-hail companies of the world, Iagnemma said.
“You sit in this very interesting spot where you can distribute technology to a number of different verticals,” he said.
That position, paired with Delphi’s resources and relationships with automakers and other transportation companies, gives nuTonomy an opportunity to accelerate the deployment of its self-driving cars, Iagnemma said.
“It’s a company like Delphi that over the course of the last several decades has built out those relationships, that is also uniquely valuable,” Iagnemma said. “It’s not at all clear to me that an upstart startup or even a tech company will be able to address those markets because they don’t have those relationships, because they haven’t established that trust.”
Originally, nuTonomy, which has a partnership with Singapore’s transportation regulating authority, expected to be able to deploy highly autonomous vehicles in limited areas within the nation state between 2020 and 2021. Now, the two companies are saying they expect to deploy self-driving vehicles as part of a commercial ride-hail network by 2019.
The acquisition of nuTonomy also gives Delphi access to some of nuTonomy’s relationships, which include agreements with Lyft in the U.S. and Grab in Singapore.
Delphi, naturally, wasn’t the only company courting the startup. NuTonomy saw interest from major players across the board, including automakers, according to company board member and Highland Capital partner Bob Davis.
“I think some of these [carmakers] are lost in terms of trying to find alternatives,” Davis told Recode. “This ‘do it yourself’ mode has been around forever. You can go back to the early days of technology when the old incumbents felt they could overpower these fledgling startups with dollars. It just isn’t happening.”
For Delphi, the acquisition gives the supplier a competitive edge in the industry. Vertically integrating as many parts of the self-driving stack as possible makes Delphi a more appealing partner or supplier for automakers.
The structure of the deal includes some earnouts based on performance, with $50 million of the acquisition price to be paid out over the next three years.
Moreover, Delphi and nuTonomy will be competing with the internal self-driving efforts of some of these automakers. A turnkey solution in an aggressive space where companies are competing on how well their self-driving technology works in order to be first to market can be seen by some as a less-than-ideal solution. Companies may want custom technology that only they have access to.
Davis, who led nuTonomy’s series A funding round, still thinks there is a big opportunity in being a self-driving software supplier.
“If you look at [some of] these automakers [they] have their efforts but they don’t have the know-how and expertise,” Davis said. “They’re going to be up against tough times. [Some] will end up being parts suppliers to the software companies.”
However, Delphi does have the opportunity to work with automakers and other companies that don’t have their own self-driving research and development efforts. Moreover, the company may be willing to piece-meal out some parts of it autonomous vehicle stack.
“I see going forward groups like Delphi, the market-leading Tier 1s of the world, to have the biggest opportunity in this space, full stop,” said Iagnemma. “They can do autonomous mobility services if they have the inclination and the capability, which they do. They can sell into every OEM globally if they have the technology and relationships Delphi does.”
This article originally appeared on Recode.net.