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Autonomous Vehicles Aim New Highs With Driverless Tests

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Autonomous-vehicle (AV) technology achieved rapid progress this year with the launch of vehicles featuring Level-2 and Level-3 functionalities. Lane correction, potential collision detection and automated parking are some of the features of these vehicles launched by Tesla (TSLA - Free Report) and Audi.

The commercial availability of Level-4 AV is no longer a distant dream as tech and automotive giants like Alphabet’s (GOOGL - Free Report) Waymo, Tesla, Baidu (BIDU - Free Report) , Lyft (LYFT - Free Report) and Ford are focusing on development and tests.

In fact, Goldman Sachs believes that the first commercially available semi-autonomous cars (Level 4) are likely to be on road in the next 1-2 years.

Alibaba (BABA - Free Report) -backed Hong Kong-based startup firm — AutoX — is the latest to join the race. Recently, the firm applied for the test of its self-driving vehicles in California. The vehicles do not feature in-car driver backup and include a remote human operator as a standby. Notably, AutoX has previously tested its AVs with backup drivers in the state.

More than 60 companies are engaged in the testing of self-driving vehicles in California. However, Waymo is the only company to have gained license for testing self-driven vehicles without human backup.

Driverless Technology: An Emerging Platform

According to Allied Market Research findings, the AV market is anticipated to witness a CAGR of 39.5% between 2019-2026 and reach $556.67 billion by the end of the timeframe.

Moreover, per McKinsey Insights, self-driving vehicles are expected to account for as much as 66% of passenger-kilometers traveled in 2040. This will likely generate revenues of $1.1 trillion from mobility services and $900 billion from sales of AVs by that year.

Furthermore, Intel (INTC - Free Report) estimates that AV technology will enable a new ‘Passenger Economy’ worth $7 trillion by 2050. The company believes that new business models like mobility-as-a-service will emerge and public safety costs will fall significantly.

Other Autonomous Startups in the Fray

Apart from AutoX, autonomous tech startups — Zoox and Pony.ai — hold a permit for testing self-driving cars, carrying passengers in the presence of a backup driver.

Notably, Zoox is currently testing its retrofitted Toyota Highlander AVs in Las Vegas after receiving permit from Nevada Department of Motor Vehicles. Recently, Hyundai-backed Pony.ai unveiled a shared, on-demand, autonomous vehicle service — BotRide — in California.

Further Argo AI, backed by investments from Ford Motor and Volkswagen, is also testing its AV capabilities. While most companies in this space focus on developing cars or operating a service, Argo AI is inclined toward the development of self-driver system.

Waymo Leads the Race for Level 4 Cars

Alphabet’s arm Waymo is definitely the most discussed company in the AV space. According to a recent Bloomberg release, Waymo’s robotaxis have taken more than 100,000 trips. The company is now planning to expand these services to iPhone users as well.  

The company recently unveiled a Level 4 self-driving taxi service in Arizona. Waymo has been been testing driverless cars, without a safety driver in the seat, for more than a year and over 10 million miles.

However, competition is intensifying in the Level 4 space.

French company Navya’s two self-driving cars are considered to have Level 4 capabilities as they operate in self-driving mode within a limited area.

Moreover, Canadian automotive supplier Magna’s MAX4 technology enables Level 4 capabilities in both urban and highway environments. The company has a partnership with Lyft to supply high-tech kits that turn vehicles into self-driving cars.

Additionally, Ford expects to launch Level 4 vehicles in 2021. Baidu and Volvo have also partnered to launch Level 4 vehicles in the same year.

Further, Elon Musk has stated that Tesla will have Level 5 electric vehicles ready by 2020.

Should US Worry About China’s AV Progress?

Although United States is leveraging its first mover advantage in the AV market, China is catching up. Baidu, Pony.ai and WeRide are among the leading testers of such vehicles in China.

Nevertheless, China’s complex traffic environment can slow down the adoption of AVs. While the core algorithm for the adoption of AVs is similar globally, operating in China is likely to require additional data and tests to resolve issues pertaining to unique and unidentified road signage.

Notably, in a KPMG index to measure the level of preparedness for AVs, China currently holds the 20th position among 25 countries, whereas the United States ranks fourth.

Zacks Rank

Baidu currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesla, Lyft and Intel carry a Zacks Rank #2 (Buy), while Alphabet and Alibaba and have a Zacks Rank #3 (Buy).

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