Reasons Behind Israel’s Rise in Auto Tech

By Eric Volkman

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23rd July 2019

Israel is a small country, its few attempts at car manufacturing ended badly and much of its real estate is desert.

It’s really the last place where a thriving auto tech industry should be located. There’s a world of difference between “should” and “is”, though. Israeli firms are at the knife’s edge of connected and autonomous vehicle technology in fact, at this point, many are world-beaters at what they do. Israel has risen quickly through the ranks and is now a hot spot for investment; according to a recent report from consultancy McKinsey, the country is No. 3 in terms of investment in mobility solutions behind only leviathans China and the US. See TU-Automotive’s interview with the Renault-Nissan-Mitsubishi Alliance in Tel Aviv.

In spite of its limitations, Israel has a major automotive role to play, according to Yakov Shaharabani, CEO of far infrared (FIR) sensor specialist AdaSky. “Israel is a much smaller country than the United States, with a higher number of cars per capita relative to its geographical space and a less-developed infrastructure,” he said. “When we’re faced with a problem, Israelis find solutions with creative, technological initiatives and that’s exactly what our start-ups are doing with new automotive tech to solve our transportation problems.”

Numerous other factors have combined to put the Israelis in the forefront of this crucial aspect of vehicle technology. One that’s absent in most other developed countries is the mandatory military service required of nearly every Israeli citizen. This military must be ready to combat any type of threat, such existential aggression delivered through digital means. Hence, the Israel Defense Forces’ (IDF) strong emphasis on technology.

Israel has what amounts to a big tech incubator in the IDF. Additionally, this relatively small force also offers a prime networking opportunity – the many tech specialists in the country have an excellent chance of meeting up while doing their service. Another advantage is a public sector that seems well aware of this opportunity and is making tangible efforts to help local entrepreneurs exploit it.

“We can see governmental or semi-governmental support like the Innovation Authority,” said Sharon Vanek, referring to the ministry of economy’s R&D development agency. She’s executive director of the California Israel Chamber of Commerce, itself an organization aimed at helping local companies sell on that juiciest of American markets. On top of supporting native Israeli businesses, Vanek believes that such agencies “help to attract foreign OEMs and Tier 1 companies to open local technology scouting offices, innovation centers and R&D facilities”.

This is another feature of the Israeli advanced car tech scene – foreign automakers and solutions providers aren’t only clients, they’re actually becoming part of the scene themselves. More than a few have opened various types of facilities in the country, from R&D centers to representative offices. The list of such entities now present in Israel reads like a modern automobile and tech industry who’s who. Among numerous others there’s BMW, Ford, and Intel, which in 2017 bought Israeli company Mobileye for an eye-popping $15Bn-plus in a deal that really put Israeli auto innovation on the map.

There’s plenty of scope for foreigners here. One such company is Yandex, the Russia-based internet conglomerate that is heavily involved in the self-driving space. It tests its autonomous cars in Israel; increasingly, locals will be involved in the development of these craft. “Israel is well known for its talented software engineers and tech community,” said Dmitry Polischuk, head of the company’s autonomous vehicle project.  “As we considered expanding our self-driving team and technology, Israel presented an ideal location to collaborate with the local tech industry and to access new engineering talent.” As with those aforementioned corporate rock stars, Yandex now has an office in the country, specifically Tel Aviv.

So, the present of Israeli auto tech looks bright but what about the future? The factors that have built the sector into what it is today aren’t changing but as a rapidly developing industry its gears can shift suddenly and almost without warning. Specifically, experts point to developments in the global auto tech sphere, plus the whims of investors and general merger/acquisition activity, as potential threats to the native companies. “There might be a slowdown [once] there is a consolidation of new technologies into a few core solutions and standards,” said Vanek.

“While there is a positive momentum globally for new automotive technologies, we may see the momentum slow down, with funds invested in a smaller group of companies and acquisitions and consolidation between players,” said Shlomit Hacohen, vice-president of marketing for imaging radar maker Arbe.

She’s a believer in Israeli auto tech and has advice for companies similar to hers that potentially face such challenges. “To overcome a change in momentum companies should develop solid business models for their products with realistic market strategies,” she said. “In the autonomous space, for example, it is important for start-ups to be realistic about scale, Level 4 and 5 vehicle timelines and, preferably, to develop solutions that also meet the needs of Level 2+/3 in terms of functionality and affordability.”