BERKELEY, BENGALURU (REUTERS) – Alphabet’s self-driving unit Waymo said on Wednesday it has raised US$2.5 billion (S$3.34 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’ 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.

The funding led by Alphabet, which owns Google, 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 automakers.

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

The duo became co-CEOs after Mr 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.

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 principal research analyst Sam Abuelsamid from Guidehouse Insights.

Initial public offerings (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 and Volkswagen, 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.

According to investor website PitchBook, Waymo, is valued at slightly more than 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 Mr Grayson Brulte, president at consultancy Brulte & Co.

“I do think investors are getting more confident after the successful TuSimple IPO,” he said, referring to the self-driving truck start-up that raised more than US$1 billion in a Nasdaq IPO last month.