Exclusive: German carmakers' HERE spent 640 million euros on R&D in 2016

AMSTERDAM (Reuters) - Germany’s three biggest carmakers have accelerated R&D spending at HERE after their 2015 acquisition of the digital mapping company as they race to develop the navigation technology needed for self-driving cars.

HERE, the biggest provider of digital maps for the automotive industry, spent 640 million euros ($767 million) on R&D in 2016, or around 55 percent of the company’s sales of 1.16 billion euros, according to documents reviewed by Reuters.

As a subsidiary of Nokia, HERE reported 266 million euros in R&D spending in the first six months of 2015 and an operating profit of 48 million euros for the first nine months of that year.

That compares with a 2016 full-year operating loss of 94 million euros after changing hands.

HERE -- now essentially a research laboratory for the carmakers -- is likely to require fresh capital as it continues to invest heavily to develop its technology.

HERE spokesman James Etheridge declined to comment on whether the company might seek more capital from its shareholders who now include chipmaker Intel which purchased a 15 percent stake in January.

High-quality digital mapping systems are crucial for directing self-driving cars, which need to know the precise location of traffic lights, lane markings and other objects which create obstacles.

The company declined to comment on its financial results, disclosed in an annual filing at the Dutch Chamber of Commerce.

HERE made available to Reuters a supplemental “directors’ report” that was drawn up in March 2017 and showed the heavy R&D spend.

AIMING FOR QUALITY

HERE was bought by German luxury carmakers BMW , Mercedes and Audi (VOWG_p.DE) in 2015 for 2.55 billion euros and moved its headquarters to Amsterdam in 2016.

Its digital maps compete with those of Alphabet’s Google Maps, used by Alphabet’s own Waze and others, as well as those of smaller Dutch rival TomTom, used by Apple and Uber.

The 2016 results reviewed by Reuters offer the first detailed insight into HERE’s financial performance since its acquisition.

In an interview in Frankfurt last week, CEO Edzard Overbeek told Reuters the company was playing a long game to develop mapping technology of high enough quality to be used in self-driving cars, drones, and robots.

Overbeek said the company was focusing on the products it will need when self-driving cars become a reality in the coming decade, rather than creating and updating a lower quality global database of maps that would quickly go stale.

“Everything we do (in high resolution mapping) is in a testing phase,” he said.

“This is not a simple problem to solve, otherwise it would have been solved,” he said.

The filing with the Dutch Chamber of Commerce, dated April 18, 2017, showed that the company had a 2016 net loss of 132 million euros.

Spokesman Etheridge said the three car makers eventually plan to sell down their combined stake below the 50 percent threshold.

On Tuesday, HERE sold a small stake to Japan’s Pioneer as part of a strategic partnership.

A group of Asian investors consisting of NavInfo Co. Ltd., Tencent Holdings Ltd. and GIC Private Ltd agreed to buy 10 percent of HERE at a 3.1 billion euros valuation in December 2016, but that deal has yet to close.