The Toyota Research Institute will focus on "artificial intelligence and robotics," according to the automaker. The location will be near Stanford University's campus in Palo Alto, California. A second location will be near Massachusetts Institute of Technology in Cambridge, Massachusetts.
Gill Pratt, who has taught engineering at Olin College of Engineering and was a program director at the U.S. Defense Advanced Research Projects Agency (DARPA), will supervise Toyota's effort. Toyota hired him in September.
"The density of people doing this kind of work in Silicon Valley is higher than any other place in the world," Pratt told the New York Times. "We want to create cars that are both safer and incredibly fun to drive." Toyota says it doesn't intend to remove the control of drivers, rather to create a "guardian angel" that prevents accidents.
Alphabet's GOOGL Google business, also located near Stanford in Mountain View, has dominated much of the debate, research and discussion surrounding autonomous technology, asserting its intention to create the software backbone of such a system and partner with one or more automakers to create a driverless car. Increasingly, Toyota and other automakers see Google and other potential newcomers to the industry such as Apple (AAPL - Get Report) as serious competition.
With $46 billion in cash and a market capitalization of nearly $207 billion, Toyota is by far the best equipped financially of the top automakers to undertake such a bold initiative. The outlay represents another effort by Akio Toyoda, president and CEO, to coax Toyota out of its traditional conservatism, to which he alluded publicly two weeks ago at the Tokyo Motor Show.
Many of today's models already use advanced software, sensors and cameras to help vehicles avoid objects, brake in emergency situations, stay within driving lanes and navigate. But true decision making in complex driving situations by an artificial brain, under extreme weather conditions, lies in the future.
"Almost all the car manufacturers, and Google, have shown the easy part," Pratt told the Wall Street Journal. "Now it's time to do the hard part."
Year-to-date, Toyota shares have been roughly flat compared to the Nikkei 225 Index of top Japanese stocks, which gained nearly 11% in value.
The potential of self-driving technology interests automakers from several standpoints: Preventing poor decisions while driving such as speeding, substance abuse and distraction almost certainly will improve safety and reduce accidents and casualties.
Automakers also recognize that many younger motorists are interested in remaining connected to friends and media. As such, they'd rather be able to text and use their smart phones than being forced to drive.
Toyota is particularly sensitive to the aging of Japan's population. Japan and other industrial societies are facing the realization that large numbers of elderly will need transportation options that don't require driving skills.