Weekly Brief: Driverless Dreamers Need to Get a Grip on Reality

Commentary By Andrew Tolve

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30th September 2019

This is beginning to sound like a broken record.

Another carmaker, another tech company, another multi-billion-dollar partnership for self-driving cars. Last week Hyundai announced that it has teamed up with Aptiv to build a robo-taxi, complete with software, sensors and onboard computer, ready for commercial deployment in 2022.

The new joint venture sounds a lot like previous joint ventures between Cruise and General Motors, Aurora and Fiat Chrysler, Volvo and Ford with Argo AI, Toyota with Uber, and Chrysler and Jaguar with Waymo to name a few. Hyundai’s partnership with Aptiv is valued at $4Bn and will be headquartered in Boston. Our Paul Myles has the full details.

From a strategy perspective, Hyundai’s gambit with Aptiv makes sense. The self-driving car industry is expensive, it’s complex, and it’s short on talent. Since 2015, job postings related to autonomous vehicles have increased by 833%, the Indeed Blog revealed last week. That’s a massive spike in demand and there’s simply not enough engineering talent to meet the need. Consolidating operations and finding new synergies between complementary partners is thus a solid strategy in general, and for Aptiv and Hyundai in particular.

To date Aptiv is best known for its robo-taxi pilots with Lyft in Las Vegas, where the two have partnered for more than 50,000 paying rides, albeit with safety drivers behind the wheel. In Hyundai Aptiv finds a carmaker with deep pockets that’s ready to take Aptiv’s autonomous platform to a global scale. Also, in Aptiv Hyundai finds a tech partner that can expedite all of its existing work with autonomous vehicles, help it catch up with rivals that are further ahead and actually get a robo-taxi on the market. That’s a win-win for both parties.

Here’s the problem: the notion that Hyundai and Aptiv will have a fully autonomous robo-taxi ready for commercial deployment by 2022 isn’t just optimistic, it’s misleading. Sure, the two may conjure up a car that can drive itself under strict parameters, without the threat of crazy urban traffic and congestion by 2022. Furthermore that product may be ready for piloting on public roads with safety drivers behind the wheel. Yet, the suggestion that it will be something more – a Level 4 robo-taxi that doesn’t need any human intervention and is ready for ride-hailing fleets to buy and deploy in mass, without safety drivers, is what the Bernstein Bears would call a “Bear Country whopper”. Two years ago we may have been fooled into thinking it. Then Uber happened and everything changed.

Last week Morgan Stanley slashed its valuation of Waymo by 40%. It once pegged the robo-taxi pioneer as worth $175Bn. Now it says the company is worth $105Bn owing to the fact that it still needs safety drivers behind the wheel in all of its vehicles and has no clear timeline for removing them, given ongoing safety concerns. If robo-taxis need safety drivers in the same way that regular taxis do, the value of a robo-taxi service plummets. Just ask Uber, which loses upwards of $1Bn a quarter, how difficult it is to run a profitable ride-hailing business that’s dependent on people behind the wheel.

Of course, $105Bn is still a huge valuation for Waymo and shows the tremendous market potential for robo-taxi companies. Likewise, it’s a good thing that Waymo is taking this slowly and keeping safety drivers behind the wheel. The fact that it wants to prevent any repeats of the Uber pedestrian fatality and doesn’t trust its technology to do so in the absence of safety drivers is commendable, even if that means a $70Bn decrease in its valuation.

Amid this reality, however, it’s time for carmakers and tech start-ups alike to drop the exaggerated deadlines. Forget 2022 or 2025 or 2050. Let’s focus on responsibly moving this technology forward, getting as many partners and players involved and continuing to innovate and test as much as possible. We do that, we’ll all end up succeeding in the long run.