Waymo, owned by Google parent Alphabet, is now valued at over US$30 billion after its second outside funding, having raised US$3.25 billion last year

Autonomous driving companies are racing to develop and commercialise their technology, but it has proven a long, expensive process

Alphabet Inc’s self-driving unit Waymo said on Wednesday it raised US$2.5 billion in its first fresh funding round in a year, after a string of defections of executives rekindled concerns about the technology struggling to scale up.

The announcement came a day after General Motors Co’s majority-owned Cruise self-driving car subsidiary said it would gain access to a US$5-billion credit line.

Self-driving start-ups are racing to build war chests to develop and commercialise technology, an expensive and time-consuming process.

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The funding led by Alphabet and other existing shareholders is the second outside funding for Waymo, which last year raised US$3.25 billion in its first external investment round since its inception 2009.

Waymo has been widely viewed as the leader of the self-driving race, but attaining the holy grail of full and safe automation remains challenging as it faces growing competition from rivals backed by legacy carmakers.

“There’s no greater challenge in artificial intelligence than building and deploying fully autonomous technology at scale,” Dmitri Dolgov and Tekedra Mawakana, Waymo’s co-CEOs, said in a statement.

The duo became co-CEOs after John Krafcik stepped down in April, followed by departures of the chief financial officer and other senior officials.

Waymo, which offers driverless rides hailing service in limited areas in Phoenix, has this year applied for permit for commercial deployment in San Francisco.

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It has also expanded into the trucking segment, testing goods transport services using autonomous trucks.

“Self-driving start-ups are unlikely to be anywhere near profitable for many years to come. They need to raise the capital, in order to fund that expansion into the operational side,” said Sam Abuelsamid, Principal Research Analyst at Guidehouse Insights.

IPOS for self-driving start-ups would be an opportunity for investors to recoup their losses, he said.

Self-driving start-up Argo AI, backed by Ford Motor Co and Volkswagen AG, plans to have another funding round before pursuing a public listing next year.

Waymo said the capital would be used for advancing Waymo Driver, the company’s autonomous driving technology, and to grow Waymo’s team, the company said.

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According to investor website PitchBook, Waymo, is valued at just over US$30 billion. Alphabet did not immediately comment on the unit’s latest valuation.

Participants in this latest round include AutoNation, Magna International, Canada Pension Plan Investment Board, Fidelity Management & Research Company, as well as new investor Tiger Global.

“The latest Waymo funding round clearly demonstrates that there is a healthy investor appetite for self-driving technologies,” said Grayson Brulte, president at consultancy Brulte & Co.

“I do think investors are getting more confident after the successful TuSimple IPO,” he said.

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