Who Will Win the Vehicle Autonomy Wars?
As widely publicized, numerous automakers and technology companies have sunk exorbitant amounts of money into the race to commercially scale self-driving vehicles. Although there has been significant progress over the past few decades, the final stage of the journey toward truly hands-free driving is proving to be quite the challenge, with many paths being pursued to achieve the ultimate goal of full autonomy.
Despite the rapidly changing landscape as new technologies emerge, the race to autonomous driving has essentially become a two-horse contest between companies focused on the gradual evolution of technology stacks from Level 2 autonomy to full self-driving and companies focused on immediate Level 4 and 5 technology stacks.
As to the first category of competitors, OEM’s such as Tesla and technology companies such as Mobileye are currently leading the way in pursuing Level 2 “plus” autonomous driving systems with the goal of gradually integrating more advanced autonomous capabilities into consumer vehicles. By offering beta-testing of driver assistance systems on a progressive basis for an upfront fee or subscription, these companies have uniquely been able to create revenue streams that enable them to subsidize the colossal costs associated with developing commercially viable “fully” autonomous driving systems. This financial bridge allows for the transition of autonomous content and continued rollout of next level applications without worrying about burn rates and lack of new funding sources.
On the other end of the spectrum are companies who are attempting to develop Level 4 and 5 vehicles or “robotaxis” from scratch through billion-dollar capital investments in autonomous technology, such as Cruise, Waymo, AutoX, DiDi, Pony.ai, Zoox, Aurora, Motional, and Optimus Ride (acquired by Magna). Although there was great exuberance that this perpetually unprofitable space was close to achieving commercial viability, a growing body of real-world data has recently provided a more sobering assessment.
In the aftermath of the widely publicized Oct. 2 crash in San Francisco where a driverless car ran over a pedestrian, Cruise suspended all U.S. operations, announced significant cutbacks in resource allocations and saw top executives resign. Additionally, there have been numerous reports of robotaxis blocking streets, failing to properly recognize emergency vehicles or emergency scenes, or simply freezing indecisively in intersections or roundabouts.
Although solving complex urban driving scenarios in a scalable way has long been the holy grail for the AV industry, these recent controversies have inevitably raised questions as to whether current driverless technology is ready for wide scale deployment in major American cities. In fact, Argo AI, which had received billions in funding from Ford and Volkswagen, shut down and completely abandoned its autonomy pursuit earlier this year. Despite these headwinds, the remaining robotaxi companies and mobility providers are publicly staying committed to realizing a future of safe autonomous mobility, even if may take more time than initially anticipated.
So, who will win the race to commercially viable self-driving? The answer seems to lie in what sector will be able to generate sustainable revenue while the technology continues to develop and emerge. Despite promises that the dream of driverless vehicles is just around the corner, the reality is that it will likely be at least 10 years before the technology is ready for full-scale deployment. According to Jeremy Carlson, Associate Director for the autonomy practice at S&P Global Mobility, “Level 5 Autonomy, which refers to a vehicle that can mimic human driving abilities in any environment, is unlikely to be available to the public before 2035 and perhaps even later.” Most industry experts agree that autonomous vehicle technology will be limited for the foreseeable future to geofenced robotaxis operated by fleets in predefined zones and hands-off systems with driver monitoring devices in personal vehicles that will still necessitate driver involvement.
The real challenge is that vehicle autonomy cannot be scaled until current safety margins or MTBF (Mean-Time-Between Failure) rates, which measure the average time a system can operate without a failure, surpass that of human drivers. Existing technology stacks simply have not reached this safety threshold and additional progress in this regard is proving to be sticker than expected. At present, Level 4 and 5 companies are still facing billion-dollar investment needs to accomplish this goal. Given astronomical burn rates and a potential 10-year runway to achieve success, the future does not look extremely positive for any company that has not figured out how to offset development costs with revenue streams.
Thus, it appears that companies like Tesla and Mobileye, who are transitioning autonomous content gradually with built-in revenue streams from existing ADAS, clearly have a leg up on the rest of the field. In fact, the only viable solution to sustainability challenges may be to build existing markets for partial autonomy that can fund the roll-out of more sophisticated systems on a revenue-driven timetable.
As more and more industry experts are acknowledging that the race to full autonomy is a marathon rather than a sprint, automakers and technology companies are beginning to shift resources to the business models pioneered by the likes of Tesla and Mobileye. The inescapable reality appears to be that reaching optimal levels of vehicle autonomy will require substantially more time and exorbitant additional investment. Unfortunately, these are not luxuries that non-revenue generating Level 4 and 5 ventures can afford, at least not as currently structured.
Given the life altering benefits vehicle autonomy will eventually provide and the enormous profits that will be realized by first movers in the industry, we have no doubt that the vehicle autonomy wars will continue to be interesting and heated. Although the safe bet currently appears to be companies systematically transitioning from partial to full autonomy, the fascinating part of this race is that technological breakthroughs can quickly change race standings at any given moment.
Copyright Nelson Law LLC
The opinions expressed in this blog are those of the author(s) and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates. This blog post is for general information purposes and is not intended to be and should not be taken as legal advice.