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Who Will Win the Robot Car Showdown, Automakers or Techies?
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They’ve been talking about it for a few years now but all of a sudden there is increased urgency. And irrespective of where they are in their race to develop self-driving cars, both technology companies and automakers want us to know that they’re on it.
Everyone that is, except Apple (AAPL - Free Report) . The Cupertino, CA-based company sticks with its tradition of secrecy, giving fans the opportunity to guesstimate its progress from the employees it poaches, the meetings it has, the news leaks by “people familiar with the matter” and so forth. Based on all these factors it does appear that “Project Titan” (as it’s supposedly called) will be shipping real cars by 2020.
And if it sticks with tradition, this will be high-end stuff for a chosen few fetching Apple a nice profit and finally, effectively diversifying its revenue base. But Apple is perhaps the only one attempting to go it alone, while everyone else focuses on collaborations to get to market that much sooner. That’s because it’s not likely very easy to jump from high-tech into cars.
Still on the Learning Curve
Building a car requires manufacturing knowledge and experience while being able to sell it requires familiarity with the channels. Then again, you may not have to scout the market if you have a specific use case for your vehicle, such as a taxi or delivery service. Automakers are obviously strongly positioned on the manufacturing and sales front (they have been in the business for ages). But the technology appears to be in its development phase, so sales are still a few years out.
From announced and rumored arrangements so far, it appears that Apple has put a billion dollars into Chinese ride-hailing company Didi Chuxing; General Motors (GM - Free Report) has invested $500 million in Lyft, Toyota has invested an undisclosed amount in Uber; and Volkswagen has invested $300 million in a similar European service called Gett. Uber is using its own technology on a Ford (F - Free Report) Fusion vehicle. Alphabet’s (GOOGL - Free Report) Waze recently started a car pooling service in Calfornia’s Bay Area and the company also tied with Fiat Chrysler where its equipment will be installed in 100 Chrysler minivans.
But Google and Ford are mostly using their own cars for testing and data collection (Google has 80 registered cars and Ford recently increased its number significantly to 30). Some consider Tesla (TSLA - Free Report) way ahead in this respect, because the company has been shipping some self-driving technology inside its Model X vehicles and will ship some more in its Model 3 roughly two years from now. Microsoft (MSFT - Free Report) has relationships with Volvo and Nissan, of which Volvo claims to be ready to ship self-driving cars and trucks as soon as regulatory approvals are in (2017 or 2018).
Since most of the players are looking for alliances that will help them collect data, it does appear that they have developed (in GM’s case also acquired) some self-driving technology that can be built upon. The more data this system reads, the better it can self-learn to become really good at analyzing and reacting to real-world situations.
So the apparatus for data collection is also important. Google and Ford are using Lidar systems, which use a combination of sensors, camera, GPS and radars. Tesla’s system is cheaper, so it can be installed on regular cars. This makes its data collection somewhat less effective but because it’s getting much greater volumes of data, a certain level of accuracy may still be achieved.
Regulatory Hurdles
The argument in support of autonomous vehicles is a higher level of safety since it eliminates the chances of human error while driving. But since most automakers in the business are loading a semi-finished product into cars, the technology simply isn’t there yet.
This has led the U.S. Department of Transportation’s National Highway Traffic Safety Administration to create five levels of vehicle automation with the starting point (zero) signifying the complete control of the driver over primary vehicle controls such as brakes, steering, throttle and motive power at all times.
The first level includes precharged brakes that automatically support the driver, the second level takes care of cruise control and lane centering in specific situations (Ford, Tesla, etc), in the third level control is ceded entirely in certain environments and in the fourth level, total control is passed to the vehicle (what Google is fighting for).
There is reason to tread softly with autonomous cars: if there’s an accident, there could be loss of life or property, people could see themselves being hurled to their deaths and not be able to do a thing about it if a fully automated vehicle experiences software issues. Or there could be accidents at the point where control shifts between a semi-automated vehicle and the driver. Driver’s skills or attention can also be a concern because cruising around in such cars doesn’t skills. Nor does it increase your attentiveness.
But companies like Google, Ford, Volvo, Uber and Lyft that are invested in the technology, are lobbying with the National Highway Traffic Safety Administration (NHTSA) to speed up the regulatory process. The Self-Driving Coalition for Safer Streets is what they call themselves as they push for common standards of operation.
Summing Up
Both technology companies and automakers are gearing up for the final showdown. One side is better at developing the brains and the other side the bodies of these animals. Then there’s the fruit company that has always believed in marrying the two.
That is why Apple’s investment in China seems more significant than meets the eye. Note that China is the world’s leading consumer of automobiles. It’s also growing into a more significant manufacturer (and surely plans to grow this position). In October last year, the government offered a tax break on small and electric vehicles, which lifted sales of small locally made Chinese cars, SUVs (up 52.4% in 2015 according to the China Automobile Association) and electric cars (up 3X).
Apple can install its system in Didi cars in order to collect data. But what is Apple giving Didi in the process and why would the Chinese government allow a U.S. company to collect data of all things? Even if it’s stored on Chinese servers, which would be a given. It appears likely that Apple will collaborate closely with one or more Chinese manufacturers on development of self-driving cars and it has paid a huge premium to maintain a certain level of control over the technology. Early entry into China will also help Apple deal with local contender Baidu (BIDU - Free Report) , which tested its self driving BMW in December last year.
My feeling is that this is a situation where technology companies won’t beat car makers simply because there’s just too much at stake. No one will forget Google’s dominance in smartphones and the resultant margin pressures at device makers. Its autonomous tech may be way ahead of the others. Its agreement with Chrysler may indicate a serious collaborative effort that may have had something to do with GM’s recent interest. But without a bit of data sharing, there will be no dice.
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Who Will Win the Robot Car Showdown, Automakers or Techies?
They’ve been talking about it for a few years now but all of a sudden there is increased urgency. And irrespective of where they are in their race to develop self-driving cars, both technology companies and automakers want us to know that they’re on it.
Everyone that is, except Apple (AAPL - Free Report) . The Cupertino, CA-based company sticks with its tradition of secrecy, giving fans the opportunity to guesstimate its progress from the employees it poaches, the meetings it has, the news leaks by “people familiar with the matter” and so forth. Based on all these factors it does appear that “Project Titan” (as it’s supposedly called) will be shipping real cars by 2020.
And if it sticks with tradition, this will be high-end stuff for a chosen few fetching Apple a nice profit and finally, effectively diversifying its revenue base. But Apple is perhaps the only one attempting to go it alone, while everyone else focuses on collaborations to get to market that much sooner. That’s because it’s not likely very easy to jump from high-tech into cars.
Still on the Learning Curve
Building a car requires manufacturing knowledge and experience while being able to sell it requires familiarity with the channels. Then again, you may not have to scout the market if you have a specific use case for your vehicle, such as a taxi or delivery service. Automakers are obviously strongly positioned on the manufacturing and sales front (they have been in the business for ages). But the technology appears to be in its development phase, so sales are still a few years out.
From announced and rumored arrangements so far, it appears that Apple has put a billion dollars into Chinese ride-hailing company Didi Chuxing; General Motors (GM - Free Report) has invested $500 million in Lyft, Toyota has invested an undisclosed amount in Uber; and Volkswagen has invested $300 million in a similar European service called Gett. Uber is using its own technology on a Ford (F - Free Report) Fusion vehicle. Alphabet’s (GOOGL - Free Report) Waze recently started a car pooling service in Calfornia’s Bay Area and the company also tied with Fiat Chrysler where its equipment will be installed in 100 Chrysler minivans.
But Google and Ford are mostly using their own cars for testing and data collection (Google has 80 registered cars and Ford recently increased its number significantly to 30). Some consider Tesla (TSLA - Free Report) way ahead in this respect, because the company has been shipping some self-driving technology inside its Model X vehicles and will ship some more in its Model 3 roughly two years from now. Microsoft (MSFT - Free Report) has relationships with Volvo and Nissan, of which Volvo claims to be ready to ship self-driving cars and trucks as soon as regulatory approvals are in (2017 or 2018).
Since most of the players are looking for alliances that will help them collect data, it does appear that they have developed (in GM’s case also acquired) some self-driving technology that can be built upon. The more data this system reads, the better it can self-learn to become really good at analyzing and reacting to real-world situations.
So the apparatus for data collection is also important. Google and Ford are using Lidar systems, which use a combination of sensors, camera, GPS and radars. Tesla’s system is cheaper, so it can be installed on regular cars. This makes its data collection somewhat less effective but because it’s getting much greater volumes of data, a certain level of accuracy may still be achieved.
Regulatory Hurdles
The argument in support of autonomous vehicles is a higher level of safety since it eliminates the chances of human error while driving. But since most automakers in the business are loading a semi-finished product into cars, the technology simply isn’t there yet.
This has led the U.S. Department of Transportation’s National Highway Traffic Safety Administration to create five levels of vehicle automation with the starting point (zero) signifying the complete control of the driver over primary vehicle controls such as brakes, steering, throttle and motive power at all times.
The first level includes precharged brakes that automatically support the driver, the second level takes care of cruise control and lane centering in specific situations (Ford, Tesla, etc), in the third level control is ceded entirely in certain environments and in the fourth level, total control is passed to the vehicle (what Google is fighting for).
There is reason to tread softly with autonomous cars: if there’s an accident, there could be loss of life or property, people could see themselves being hurled to their deaths and not be able to do a thing about it if a fully automated vehicle experiences software issues. Or there could be accidents at the point where control shifts between a semi-automated vehicle and the driver. Driver’s skills or attention can also be a concern because cruising around in such cars doesn’t skills. Nor does it increase your attentiveness.
But companies like Google, Ford, Volvo, Uber and Lyft that are invested in the technology, are lobbying with the National Highway Traffic Safety Administration (NHTSA) to speed up the regulatory process. The Self-Driving Coalition for Safer Streets is what they call themselves as they push for common standards of operation.
Summing Up
Both technology companies and automakers are gearing up for the final showdown. One side is better at developing the brains and the other side the bodies of these animals. Then there’s the fruit company that has always believed in marrying the two.
That is why Apple’s investment in China seems more significant than meets the eye. Note that China is the world’s leading consumer of automobiles. It’s also growing into a more significant manufacturer (and surely plans to grow this position). In October last year, the government offered a tax break on small and electric vehicles, which lifted sales of small locally made Chinese cars, SUVs (up 52.4% in 2015 according to the China Automobile Association) and electric cars (up 3X).
Apple can install its system in Didi cars in order to collect data. But what is Apple giving Didi in the process and why would the Chinese government allow a U.S. company to collect data of all things? Even if it’s stored on Chinese servers, which would be a given. It appears likely that Apple will collaborate closely with one or more Chinese manufacturers on development of self-driving cars and it has paid a huge premium to maintain a certain level of control over the technology. Early entry into China will also help Apple deal with local contender Baidu (BIDU - Free Report) , which tested its self driving BMW in December last year.
My feeling is that this is a situation where technology companies won’t beat car makers simply because there’s just too much at stake. No one will forget Google’s dominance in smartphones and the resultant margin pressures at device makers. Its autonomous tech may be way ahead of the others. Its agreement with Chrysler may indicate a serious collaborative effort that may have had something to do with GM’s recent interest. But without a bit of data sharing, there will be no dice.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>