Weekly Brief: Heat Returns to Driverless Technology

A week after CES 2021 gave us virtually nothing to shout about, the auto industry delivered a solid batch of mobility headlines last week.

General Motors’ Cruise struck a long-term strategic partnership with digital giant Microsoft. Waymo CEO John Krafcik dissed Elon Musk’s approach to self-driving cars. Argo announced a new automotive-grade hardware system for its autonomous vehicles and Joe Biden was sworn in as the 46th president of the United States, probably with far-reaching implications for the future of the American automotive sector.

Let’s take them one by one. The Microsoft-Cruise partnership is built around a $2Bn equity investment into Cruise to fund its continued research and development as a pioneer in the AV space. Microsoft, GM, Honda and a handful of institutional investors partnered for the investment. In return, Microsoft will become Cruise’s preferred cloud partner; Cruise will use Microsoft’s cloud and edge computing platform, Azure, to commercialize its AV solutions at scale. As part of the agreement, GM commits to use Azure as its cloud-computing platform as well. The deal brings GM Cruise’s valuation to $30Bn.

The new infusion of cash is important for Cruise and landing access to Microsoft’s cloud platform at a discounted rate is helpful. However, the big news here is that the last of the big American tech companies, which had been sitting on the sidelines of the AV industry, now has jumped in and secured a valuable position. Alphabet has Waymo, Apple is working on its own self-driving solution, Tesla has Autopilot and Amazon has Zoox. While each of these companies has been at it for longer than Microsoft, they’re also pot committed in an industry where much is still unknown, including what type of technology is best and what future regulations will look like. If Microsoft can hover above the fray and build out its business as a cloud and data provider for the AV space, the straggler may end up winning the race.

Which brings us to headline number two, Waymo CEO John Krafcik throwing shade at Elon Musk. To be fair, Krafcik is understated and is loath to draw attention to his company, the very antithesis of Elon Musk, who is fiery and eager to keep as many eyeballs on himself and Tesla as possible. Krafcik throwing shade sounds like this, courtesy of Germany’s Manager Magazine: “For us, Tesla is not a competitor at all. We manufacture a completely autonomous driving system. Tesla is an automaker that is developing a really good driver assistance system.”

At the heart of this statement is a Pacific-ocean-sized rift in strategic approach. Musk thinks LiDAR is a joke [placing his faith in camera and radar technology] and that building up to full autonomy by way of an active fleet of consumer cars is the most logical, cost-effective and expeditious way to proceed. Waymo thinks that’s unsafe and untenable and will never produce an acceptable result. Who’s right? It remains to be seen, which is, again, why sitting in Microsoft’s position above the fray isn’t a bad place to be.

Argo is in the Waymo camp. Pot committed and determined to develop a comprehensive, safe and LiDAR-based solution for AVs. Last week it unveiled its fourth generation self-driving system, which it claims is the first self-driving hardware system with automotive-grade components. Automotive-grade means that the new system is built to withstand extreme thermal conditions and maintain structural integrity over time and, thus, is ready to be manufactured in significant volumes. Argo has installed its fourth-generation hardware on its fleet of Ford Escape Hybrid self-driving test vehicles.

Lastly, Joe Biden became the 46th president of the United States, ushering in a more progressive vision for the automotive sector in America. Biden has pledged to make electrification a top priority. Expect to see full federal tax credits return for EVs, even for those companies that have sold more than 200,000 EVs to date (rejoice, Tesla and GM). Biden has pledged to offer incentives to businesses to buy American-made EVs for large fleets. Also expect to see a more active interest from the federal government in producing regulations for the self-driving car industry. Corporate America generally despises regulations but, in this case, the AV industry is in dire need of guidance from the top, to help steer future investment.

Given typical Washington dysfunction, next to nothing of this vision would get put into motion. Yet, with Democrats now in control of the House, the Senate, and the presidency, that could change – at least until midterm elections roll around.

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