The future of the automotive industry is at a tipping point. New technologies have arrived from several angles with the introduction of C.A.S.E (Connected, Autonomous, Shared, Electrified) technologies. For example, by 2030 the majority of vehicles will be connected, there will be +20 million self-driving vehicles (Statista), and 130 million EV on the roads (IEA), and hundreds of millions of subscribers to various mobility apps and services. In each vertical new and exciting eco-systems have been born and significant investments have been made. In this blog, we will take a deeper dive into the state of autonomous vehicles.
The Investment
Few new technologies have been more anticipated than the self-driving. This opportunity has created a large and well-funded eco-system. Pitchbook reported that the self-driving vertical received $10.3 billion worldwide in VC financing across 146 deals in 2018.
Level five autonomous vehicles may not be around the corner as first expected. This has been reflected in the slow-down in recent investment with investors investing $3.2 billion into 64 deals so far this year (as reported by Pitchbook).
There has been a movement towards investors targeting early-stage start-ups working on specific self-driving use cases, rather than full-stack autonomy programs. We predict that outside of the larger and more well-capitalised leaders, that many full-stack autonomous programs may begin to look outside of the asphalt to other industries and applications (for example construction, mining and industrial). It could be said that these industries are better suited to the current state of autonomy, as they are within a much more controlled environment, with much less human interaction, and a well-defined geo-fenced area. Ultimately, it is likely that these talented full-stack companies and employees will begin to search for these higher near-term ROI opportunities that will also support their over-arching program and vision.
The Eco-Systems
Although, level five autonomy is not right around the corner, there still large investments being made from well capitalised full-stack programs – with corporate or large venture fund funding. Additionally, there is an intense focus on the “now” which is level one to level two autonomy. Both of which has created and will continue to sustain a large thriving eco-system. The over-arching eco-system can be simplistically broken down into two categories: the platform, and the component/system. With each of these categories entailing large and competitive industries and eco-systems on their own.
Platforms:
In this definition platforms can be defined as companies with self-driving programs and solutions. These are the companies which are racing towards autonomy; they can be segmented into two categories.
Tech Players: Waymio, Uber, Lyft, Zoox, Apple, Easy Mile, Baidu etc.Traditional OEM’s: General Motors, Tesla, Audi, BMW, Hyundai, Ford, Mercedes etc.
Systems:
These are the companies which are focused on developing specific technologies and systems which support the underlying platform. This vertical can be broken into several of their own verticals, and each has received large investments in the past few years. Some of these sub-verticals and their companies include:
Processing: Mobileeye, Nvidia, Renesas, Intel, Qualcomm
Sensors: Valeo, Hitachi, Sony, Melexis, Point Grey, Lear, Velodyne
Connectivity: Intel, Contin, Mentor Graphics, Denso, Peloton, Renesas
Mapping: Tomtom, Civil Maps, Deep Map, Kaarta, Aeye
Algorithms: Nvidia, dSpace, Mobileye, Mitsubishi Electric, ETAS
Security: Argus, Arilou, Karamba Security, Symantec, Intel
Localisation: Point One Nav, Trimble, Swift, Novatel
What does this mean?
Traditional OEM’s are fully aware of the tipping point, which is upon them. That will likely continue to invest multi-billions of dollars into their autonomous vehicle programs for the foreseeable future. These programs will be focused on both the near-term, level one and two autonomy, as well as the longer-term full autonomy vision. This will enable the well-positioned supporting system eco-system companies to support these programs and generate returns in both the near and long term.
As the size of the prize is so extremely large, the well capitalised tech firms and their programs will continue to shoot for full autonomy. This will provide additional support to the broarder eco-system, as these programs will continue to require more complete and detailed mapping solutions, less expensive LIDAR and other sensors, and more robust security options etc.
With no clear path to positive cashflows, less capitalised full-stack autonomous programs will need to search for shorter-term returns or run the risk of seeing their capital drying up. As mentioned earlier, it is likely that some of these programs and employees begin to focus on other sectors outside of passenger vehicles. Ultimately, if they succeed the system eco-system will thrive.
As a unit, the supporting system companies may have the most diversified customer exposure and best short-term cashflows. Especially, the companies which are focused on supporting level one through to level five autonomy and where their application can be utilised in autonomous programs outside passenger vehicles.
The tipping point for level five autonomy may be further out than expected, but given these underlying trends, expect investors, entrepreneurs, and companies to continue to invest their time, effort and money into autonomous vehicles companies.