Self-driving startups race down a narrowing road

DETROIT/SAN FRANCISCO (Reuters) – Lei Xu and Justin Song once worked at electric carmaker Tesla Inc (TSLA.O), one of the hottest companies in Silicon Valley. But with interest and investments in autonomous vehicles mounting, they left to pursue what they see as the next big thing.

Nullmax CEO Lei Xu drives a Lincoln MKZ sedan equipped with his company’s prototype self-driving hardware and software in Fremont, California, U.S. on October 9, 2017. REUTERS/Jane Lanhee Lee

Their company, Nullmax, is one of more than 240 startups worldwide, including 75 in Silicon Valley, attempting to design software, hardware components and systems for future self-driving cars, according to a Reuters analysis.

Xu and Song are bankrolled by corporate money, but unlike many of their fellow entrepreneurs, they skipped funding from Silicon Valley venture capitalists. Founded in August 2016, Nullmax got $ 10 million from a Chinese firm, Xinmao Science and Technology Co (000836.SZ).

By seeking corporate backing in China, the Nullmax founders managed to sidestep an issue facing other startups in the sector: While big automotive and technology companies are pouring billions into the autonomous vehicle space, Silicon Valley investors so far have been fairly restrained in increasing their bets.

Headlines have been dominated by old-line players such as General Motors Co (GM.N), which jolted the industry last year when it bought a tiny San Francisco software company called Cruise Automation for a reported $ 1 billion. Just this week, top-tier supplier Delphi Automotive PLC (DLPH.N) acquired Boston-based software startup nuTonomy for $ 450 million.

Now, “every startup thinks they will get a billion dollars” in valuation, said Evangelos Simoudis, a Silicon Valley venture investor and an advisor on corporate innovation.

However, investment in untested startup companies remains relatively modest despite all the buzz and lofty expectations. Total funding of self-driving startups from both corporate and private investors has barely topped $ 5 billion, the Reuters analysis of publicly available data shows.

With the notable exceptions of Andreessen Horowitz and New Enterprise Associates, few of the big Valley venture capital firms are heavily invested in the sector. Overall, only seven of the top 30 self-driving startups have received later-stage funding, the Reuters analysis shows, an indication that some venture capitalists are ambivalent about the industry’s potential.

(For a graphic of venture and corporate funding of self-driving startups, see: tmsnrt.rs/2xOX0jN)

Skeptics note that few of the startups are making money. And established auto and parts companies have not demonstrated a clear path to revenue and profitability in autonomous vehicles despite their big bets in the space.

Another sticking point: While the initial wave of self-driving vehicles is expected to begin commercial service in 2019-2020, experts expect the transition from human-driven to automated cars could take a decade or more to roll out.

Cautions Sergio Marchionne, chief executive officer of Fiat Chrysler Automobiles (FCHA.MI): “You can destroy a lot of value by chasing your tail in autonomous driving.”

CORPORATE INVESTMENTS

All told, U.S. automotive and technology firms likely have invested some $ 40 billion to $ 50 billion in self-driving technology in recent years, mainly through acquisitions and partnerships. The full extent is hard to know because big players such as Alphabet Inc (GOOGL.O), whose Waymo subsidiary is considered among the front-runners in the arena, have not revealed the full scope of their investments, although it is believed to be in the billions.

Among the top corporate investors in the sector are Samsung Group [SAGR.UL], Intel Corp (INTC.O), Qualcomm Inc (QCOM.O), Delphi and Robert Bosch GmbH [ROBG.UL]. Corporate investors also have backed five of the six self-driving startups with valuations of $ 1 billion or more.

(For a graphic on key players in the development of autonomous vehicles, see: tmsnrt.rs/2nYv7gc)

Whether the industry is poised to produce more such unicorns is now a topic of much debate. Two former investors in Cruise Automation, for example, are poles apart in their views of self-driving vehicles and technology.

Veronica Wu, managing partner in Palo Alto-based Hone Capital, said her company continues to invest in “quite a number” of self-driving startups, while acknowledging that the technology will take time to deploy.

“It’s a matter of when, not if,” she said. “We’re fairly optimistic.”

In contrast, Sunny Dhillon of Signia Venture Partners, another Cruise investor, said his firm does not see any attractive investments in the sector right now.

The hefty price paid by GM for Cruise, he said, “made the space very frothy, with every computer vision and robotics PhD student seemingly emerging with a new self-driving car startup.”

In addition, he said many established players “already have made their big investments (and) acquisitions” in the sector. That could limit investors’ potential returns and entrepreneurs’ payoffs down the road.

Quin Garcia, a partner in San Francisco-based AutoTech Ventures, concurs that the space is crowded and valuations are inflated. There may still be “a select few IPOs, but there will be many failures of autonomous vehicle startups” by 2021, he said.

NULLMAX IN CHINA

Those odds haven’t deterred Nullmax founders Xu and Song, who are looking to differentiate themselves.

With many self-driving startups looking to supply U.S. and European automakers, the Chinese-born entrepreneurs, whose specialties are camera-based vision systems and artificial intelligence, are focused on China. They expect to deliver the first partially automated systems to Chinese automakers by 2020.

The U.S.-educated entrepreneurs, both 35, now work out of a small shop in Fremont, Calif., not far from Tesla’s sprawling home factory. Xu once worked at Tesla as a senior engineer while Song specialized in supply chain and quality engineering. Tesla declined to confirm their prior employment.

Xu said the company employs about 50 people, most of them in a larger office in Shanghai. He said the company wants to keep a foot in California, which is a hub of U.S. tech talent, and where regulators have smoothed the way for testing of self-driving vehicles.

As for how Nullmax plans to cash out, Xu navigated around that question.

“We’re pretty busy,” he said. “We don’t much time to think about an IPO right now.”

Reporting by Paul Lienert in Detroit and Jane Lanhee Lee in San Francisco; Editing by Joe White and Marla Dickerson

Our Standards:The Thomson Reuters Trust Principles.

Tech

The Senate Is About to Approve Commercial Sale of Self-Driving Cars (But Not Trucks)

You will soon be able to ride home from your local car dealership in a car that finds its way there unassisted while you nap or read. That reality came a whole lot closer this week, with bipartisan agreement in the Senate on legislation allowing self-driving cars to take the the roads. The law is expected to come up for vote in the near future, and pass.

The House passed similar legislation, also with bipartisan support, several weeks ago. That legislation allows car manufacturers to sell up to 25,000 autonomous vehicles the first year they offer them. That will go up to 100,000 cars a year if the self-driving cars prove as safe as human-driven ones. And that’s not all. The Trump administration also helped out recently by issuing voluntary safety guidelines for autonomous cars and at the same time requesting that states avoid writing laws or regulations governing self-driving cars and possibly hampering their introduction.

The senators who arrived at the self-driving deal note that autonomous cars appear to be safer than human-driven ones. “Ultimately, we expect adoption of self-driving vehicle technologies will save lives, improve mobility for people with disabilities, and create new jobs,” said Senators John Thune (R-S.D.) and Gary Peters (D-Mich.) in a joint statement. They may be right: When a Tesla owner died while his car was in Autopilot mode last summer, company founder Elon Musk pointed out that it was the first known Autopilot fatality in 130 million miles of driving, whereas there’s a human fatality for every 89 million miles of traditional driving.

But if cars with no one at the wheel will soon become a common sight, the same won’t be true of semi trucks. The Teamsters successfully lobbied for the House version of the bill to limit self-driving vehicles to 10,000 pounds or less. That could be a problem for the U.S. trucking industry, which was short an estimated 48,000 drivers at the end of 2015, a shortage that’s expected to grow to 175,000 over the next seven years. That will create enormous pressure to replace hard-to-find long-haul truck drivers with no-muss, no-fuss AI.

Tech

Ford, Lyft will partner to deploy self-driving cars

DETROIT (Reuters) – Ford Motor Co said on Wednesday it will collaborate with Lyft to deploy Ford self-driving vehicles on the ride services company’s network in large numbers by 2021.

Ford and Lyft teams will begin working together to design software to allow Ford vehicles to communicate with Lyft’s smartphone apps.

Ford self-driving test vehicles will be connected to Lyft’s network, but at first, customers will not be able to use them, Sherif Marakby, Ford’s vice president for autonomous vehicles and electrification, told Reuters. Ford will put human-driven vehicles on Lyft’s network.

He did not say when Ford and Lyft expect to offer the first rides in self-driving cars.

“We’re not building prototypes for the sake of building prototypes,” Marakby said, adding Ford intends to ultimately put thousands of self-driving vehicles in use.

Ford’s new Chief Executive Jim Hackett is scheduled to meet with investors on Tuesday to outline the Dearborn, Mich. automaker’s strategy for boosting profitability. Ford shares are down 1.65 percent so far this year, while Detroit rival General Motors Co’s shares have risen 15.6 percent, and Fiat Chrysler Automobiles NV shares are up 71 percent.

Hackett’s plans to compete for revenue from mobility services, which include car sharing and ride-hailing, will be one area of focus for investors. The Lyft partnership fills in a piece of the puzzle.

Ford also is testing delivery services using self-driving vehicles and a van shuttle service. The self-driving vehicles Ford will deploy through Lyft will use software developed by Argo AI, a company in which Ford is investing $ 1 billion over the next five years.

The company has said it will invest $ 700 million in a factory in Flat Rock, Michigan, to make it capable of building electric and self driving vehicles.

Lyft has said it will offer an open platform for companies to deploy self-driving vehicles on its network, and has partnerships with self driving vehicle technology startup Drive.ai and Alphabet Inc’s Waymo self driving car unit.

GM has a 9 percent stake in Lyft, acquired for $ 500 million in January 2016. “Our relationship with GM has always been a non-exclusive relationship,” Raj Kapoor, Lyft’s chief strategy officer, told Reuters.

GM is also assembling the assets necessary to launch its own ride services using self-driving cars, building its Maven car-sharing unit and preparing to launch mass production of autonomous Chevrolet Bolt electric cars at a factory in suburban Detroit.

Reporting By Joseph White; Editing by Cynthia Osterman

Our Standards:The Thomson Reuters Trust Principles.

Tech

Self-driving Olli shuttle with IBM Watson debuts in Washington area

Olli, a self-driving shuttle for 12 passengers running IBM Watson Internet of Things technology, made its debut in a shopping area of the Washington suburbs on Thursday.

While some “fine-tuning” of the self-driving features are needed, passengers, by this fall, should be able to ride around and speak directions to Olli on the private roads at the National Harbor shopping and entertainment area on the Maryland side of the Potomac River, according to a spokeswoman for Local Motors, the designer of Olli.

The vision is that Olli will be used in all kinds of venues, such as crowded urban areas, college and corporate campuses and theme parks. It could also become the “last mile” connection from a subway or bus stop to a job site. Miami-Dade County has ordered two of the vehicles for a pilot project there, said the Local Motors spokeswoman, Jacqueline Keidel.

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CIO Cloud Computing

Self-driving Olli shuttle with IBM Watson debuts in Washington area

Olli, a self-driving shuttle for 12 passengers running IBM Watson Internet of Things technology, made its debut in a shopping area of the Washington suburbs on Thursday.

While some “fine-tuning” of the self-driving features are needed, passengers, by this fall, should be able to ride around and speak directions to Olli on the private roads at the National Harbor shopping and entertainment area on the Maryland side of the Potomac River, according to a spokeswoman for Local Motors, the designer of Olli.

The vision is that Olli will be used in all kinds of venues, such as crowded urban areas, college and corporate campuses and theme parks. It could also become the “last mile” connection from a subway or bus stop to a job site. Miami-Dade County has ordered two of the vehicles for a pilot project there, said the Local Motors spokeswoman, Jacqueline Keidel.

To read this article in full or to leave a comment, please click here

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