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Google Finds 'Waze' to Build Self-Driving Technology

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When asked some time back about the use cases for self-driving cars, Alphabet (GOOGL - Free Report) executives said that they were exploring alternatives. Things have changed somewhat since then and we have slightly greater clarity on whether Google will maintain its own fleet, renting out for delivery of goods, food and/or passenger transport, or whether it will rent vehicles from their makers and sell those services itself.

My bet was always on the latter, first because Google is primarily a technology company and thrives on making the kind of software that can take over our lives. Getting into the low-margin business of vehicle maintenance and renting just isn’t its area of expertise.

Furthermore, the kind of investment that is going into getting these animals on the road isn’t justified unless there is a lucrative business out there with a relatively quick payback time.

So the company’s initial step toward commercialization by getting key people on board and announcing the name of the unit as Waymo was heartening. The goal of this unit is to develop self-driving technology for car makers.

How Does All This Tie In with the Waze Carpool Service?    

Waze was an Israeli crowd-sourced mapping service providing users with information such as traffic, road conditions and other helpful pointers, so they could quickly decide their route. At least that’s what it was in 2013 when Google acquired it for $1.15 billion.

Today, Waze is also a carpooling service that gets people travelling in the same direction to travel together and share the cost of gas. So yes, there are headaches to availing the service like having to book way in advance or not having anybody to pick one up on occasion. It also doesn’t allow anyone to become a driver, so they can’t make a living from it.

All this goes to show that Google’s plans in the area probably aren’t crystallized and the service is a temporary measure to access that all-important thing these days called data. Data that can add to the treasure trove Google’s already collecting through the test driving of its self-driving cars.  

The difficulties don’t seem to have deterred users, however, because Google just announced the expansion of the service to unannounced locations in the U.S. and Latin America. And while not all Waze users are signing up for carpooling, it’s significant that their numbers have reportedly swelled from 45 million in 2013 to 75 million today. So even if a small percentage of this growing number of people goes for it, it can still be a compelling number.

Taxi Service Is What Uber, Lyft Do Well

There’s no doubt about it, these two companies have been growing in leaps and bounds as the convenience and quality of service have attracted more and more people. So the prospect of other, perhaps cheaper (because a self-driving car doesn’t need a driver) services coming online certainly isn’t good news.

Google was an initial investor in Uber, but when the company started developing self-driving technology to save its neck, Google representative David Drummond removed himself from its board. Uber still uses Google mapping services, but has increased investments to develop maps of its own.

Conclusion

Uber and its pals have popularized the concept of ride-hailing/car-sharing services but now that the concept has caught on, there will be new entrants. This is a big opportunity for car makers because this is the space where new cars will be deployed in the future.

On the technology side, there is the need for machine learning and cloud support, mapping technology, and sensors, which have to be installed on cars built to house the technology. And that’s exactly why companies like Intel (INTC - Free Report) are tying up with companies like Mobileye, while NVIDIA (NVDA - Free Report) pairs up with Baidu (BIDU - Free Report) and Microsoft (MSFT - Free Report) . Then of course there’s Google. These companies are in turn testing the technology through collaboration agreements with automakers.

But who will get there first? Industry watchers don’t expect anything viable until 2020. Even if it’s a couple of years out from there, it does look like there will be more than one approach/technology driving the experience. And since the possibilities are tremendous, there won’t necessarily be a single winner.

Google, Microsoft, Intel and NVIDIA all have a Zacks Rank #3 (Hold) right now. But you can find the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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