Legacy automotive firms are operating on the fly to endure the frictional EV market transition. Specialized AV firms are front and center to ease the process.
The closest thing to EV Automotive perfection is Tesla. Companies chose what to outsource, what to acquire, and what to do in-house. Tesla has an ideal blend of logistic operations to succeed in the current economic climate in a new industry. Legacy ICE brands are in a not so unique position of playing catch-up with Tesla. To do so, they’ve subsidized and partnered with niche new technology companies that work to refine fully autonomous vehicle systems. Whether it be for specialized B2B operations or the more conventionally known passenger road vehicles, these companies are attempting to bring outdated OEMs into the next generation of transportation.
The driverless vehicle devs
Autonomous systems can be used for a diverse range of tasks. Moving containers at ports, servicing as a robotaxi, or even flying drones all require some degree of autonomous systems that interact with physical space. These versatile applications of autonomous systems create its profitability as a technology. Waymo, Argo AI, and Zoox all work with Alphabet, Amazon, Ford, VW, and others to carve out some chunk of the “full autonomy” market.
Nuro is an example of food delivery in application for this sector. The California-based autonomous vehicle firm hit an 8.6 billion USD valuation last year and may finally roll out its fleet of autonomous delivery vehicles. It’s the first company in the state to receive all of the necessary permits to operate a driverless system commercially and can start charging money for its services within the state. Moving food is easier than moving people in terms of safety standards but Nuro still needs to be road safe for others.
Waymo is a subsidiary of Alphabet as Google's own AV firm. Waymo only has about 600 vehicles in the fleet with TechCrunch reporting that 300 to 400 of their vehicles operate in sunny Phoenix, Arizona. Recently, however, Waymo has partnered with global logistics company C.H. Robinson to ferry cargo down a 240-mile road in Texas with its autonomous trucks. Also in late February, the California Public Utilities Commission (CPUC) issued permits to Waymo self-driving. Waymo has approached vehicle autonomy through passenger vehicles as well as the logistics sector for general product shipping.
Argo AI has been testing its autonomous vehicle technology in Ford vehicles around Palo Alto since 2019. Argo AI and Ford have also partnered with rideshare company Lyftto gather data laying the groundwork for deployment of 1,000 robotaxis on the Lyft network in multiple markets during the next five years. Lyft will receive a 2.5% stake in Argo AI in their agreement. They are one of many firms who have received permits to participate in the CPUC’s Drivered Autonomous Vehicle Passenger Service Pilot program, which requires a human safety operator to be behind the wheel. Argo AI seems likely to IPO 2022 according to popular sentiment.
Amazon’s partner Zoox is a bit different from its rivals. They have developed their own self-driving software stack, their own on-demand ride-sharing app, and their own vehicle. Zoox also plans to own, manage and operate its robotaxi fleet. This is a bit different from Tesla’s prospective approach of allowing users to rent out their Tesla’s to the public when not being used. Last year they developed a cube-like vehicle loaded with sensors, no steering wheel and a moonroof that can transport four people at speeds of up to 75 miles per hour.
China’s competitors
Based in Shanghai, Inceptio was founded in 2018 by Julian Ma, a former corporate vice president at Tencent. This startup collaborated with domestic OEMs to develop China’s first driverless heavy-duty trucks that use freight routes across the country. Partnerships include Dongfeng Trucks, Bosch, SinoTruk, and many notable OEMs. Recently, Inceptio raised a 188 million USD funding round led by Sequoia Capital China and Legend Capital, the investment arm of Lenovo’s parent company. Inceptio previously raised 270 million USD in August led by JD Logistics, Meituan, CATL, and Asia-focused investment firm PAG.
AutoX RoboTaxis already has a foothold in the United States. Based in Shenzhen, the company is one of many AV companies to acquire California DMV’s completely driverless RoboTaxi permit. In 2018, AutoX launched the first RoboDelivery pilot service in California, partnering with grocery stores and restaurants in the San Jose area. The AI startup has partnered with Alibaba’s Amap, MediaTek and Shanghai Auto. In 2020, AutoX was given the green light to launch a fleet of unmanned vehicles in downtown Shenzhen’s Nanshan District. Compared to Waymo’s trial city of sprawling Phoenix, Arizona, Shenzhen is much more dense with more complex traffic conditions.
Earlier this year, Jidu Auto, an electric carmaking company founded by Baidu and its Chinese auto partner Geely only a year ago, announced a near 400 million USD in a Series A funding round. They plan to debut a concept vehicle at this year’s Beijing Motor Show in April while the mass-produced version of Jidu’s robocar is expected to launch in 2023. Nvidia will be supplying the chips for Jidu using their Drive Orin System-on-a-chip (Soc).
Who’s winning the race?
In February, Germany’s Manager Magazin reported that Volkswagen has been in talks with Huawei to acquire their autonomous driving unit for billions of euros. It’s clear that the race to autonomy is in full sprint with a packed crowd of competitors raising significant amounts of capital. If there is to be a hypothetical single winner, it is most arguably Tesla. Extrapolating from previous statements on Tesla’s Autopilot miles, today’s number is likely substantially higher than 3 billion miles compared to Waymo and the crowd. Tesla’s heavily refined and tested autopilot flexes advanced autonomous systems that don't require Lidar like many other competitors. Minimizing the use of sensors helps Tesla keep production cheaper and simple. As with many other aspects of their business, Tesla has found, at least so far, the most efficient business model and logistics for an exemplary EV company. China is still enjoying their advantageous experience but American ingenuity can be rapid and game changing for the market.
There is probably enough space in the industry for there to be many different winners in many different roles. For these specialized AV firms, success depends firstly on progress, secondly on the company’s partnerships. The complexity of systemic integration should impact profitability as well. This means that some companies focus on food delivery, robotaxi service, logistics and transportation of commerce, and many other different niche areas of application. These provide firms unique opportunities to try and get footholds in different subsectors. Tesla’s one stop shop is still the clear frontrunner while the rest fight for relevance. Nonetheless there is clearly substantial investment volume globally outside of Tesla. Retail investors should explore the many different inputs within the EV industry like precious metals, battery making, AV software, vehicle manufacturing, and all other components to navigate risk.