In the race to start the world’s first driving business without human drivers, everyone is chasing Alphabet Inc.’s Waymo.
The Google sibling has cleared the way to beat its nearest rivals, General Motors Co. and a couple of other players, by at least a year to introduce driverless cars to the public. A deal reached in January to buy thousands of additional Chrysler Pacifica minivans, which get kitted out with sensors that can see hundreds of yards in any direction, puts Waymo’s lead into stark relief. No other company is offering for-hire rides yet, let alone preparing to carry passengers in more than one city this year.
GM plans to start a ride-hailing service with its Chevrolet Bolt—the one with no steering wheel or pedals, the ultimate goal in autonomous technology—late next year, assuming the US government has protocols in place by then. SoftBank Vision Fund, the gigantic Japanese tech investor, backed that plan on May 31 by dropping $2.25 billion into GM Cruise Holdings, the automaker’s autonomous drive unit. Most of the others trying solve the last remaining self-driving puzzles are more cautious, targeting 2020 or later.
The road to autonomy is long and exceedingly complicated. It can also be dangerous: Two high-profile efforts, from Uber Technologies Inc. and Tesla Inc., were involved in crashes that caused the death of a pedestrian (in the first known case of a person killed by a self-driving vehicle) and a driver using an assistance program touted as a precursor to autonomy. One of Waymo’s autonomous vans was involved in a collision just last week. But the perceived stakes are so enormous, with the promise of transport businesses needing little in labor costs, that many players are racing to master the technology and put it to work.
Without drivers, operating margins could be … more than twice what carmakers generate right now.
In the next three years, almost all of these contenders will be able show off cars capable of navigating city streets at casual speeds along firmly fixed routes. Most of the companies now building autonomous vehicles can already handle basic driving at low speeds. This can give an impression of parity and sameness. Yet despite being in its infancy, autonomous driving has leaders starting to emerge.
“Waymo has developed a phenomenal system and is ahead of the pack,” said Brian Collie, head of Boston Consulting Group’s US automotive practice, who singled out the top two. “But that’s very different from being able to manufacture an autonomous vehicle.
You have to look at GM.
In Europe, Daimler is leading the pack.”
The finish line isn’t just reaching Level 4 on the five-step scale of autonomous driving. That’s the threshold at which a car can drive on pre-mapped routes and handle anything on its planned course without the intervention of a driver. Only Waymo has tested Level 4 vehicles on passengers who aren’t its employees—and those people volunteered to be test subjects. No one has yet demonstrated at Level 5, where the car is so independent that there’s no steering wheel.
The victors will also need to pioneer businesses around the technology. Delivery and taxi services capable of generating huge profits is the end game for all. Goldman Sachs Group Inc. predicts that robo-taxis will help the ride-hailing and -sharing business grow from $5 billion in revenue today to $285 billion by 2030. There are grand hopes for this business. Without drivers, operating margins could be in the 20 percent range, more
than twice what carmakers generate right now. If that kind of growth and profit come to pass—very big ifs—it would be almost three times what GM makes in a year. And that doesn’t begin to count the money to be made in delivery.
Why does it matter who gets there first? To make a driverless business work takes a big fleet to establish service in major markets, as well as a brand name that becomes as synonymous with getting a ride as Uber is today. Observers expect the field to narrow. “There won’t be a ton of companies doing this,” Collie said. “There will be a select few. Being there first establishes consumer trust. Brand value matters.”
For now, investors are throwing money at possible winners. Tesla’s valuation soared in 2016 after an analyst from Morgan Stanley, also its lead underwriter, speculated that the company’s electric cars would spawn a self-driving fleet. GM shares are up 20 percent since a June 2017 announcement that a plant to build driverless vehicles was up and running. Zoox Inc.
has already raised $360 million, a huge sum for a startup with no revenue.
Of course, the era when most people ditch their driver’s licenses and rely on self-driving taxis remains far off. The technology costs more than the cars, and with few players actually testing the cars for the public, widespread adoption is years away.
Even Waymo is still in the pilot stage.
The most aggressive forecasts have the majority of people driving their own cars for at least the next decade. Chris Urmson, founder of Aurora Innovation INC. and one of the pioneers of the field, counts as one of the optimists.
“I can see these on the road in real numbers in five to 10 years,” he said. That means even today’s laggards have time to catch up.
THE CLEAR LEADERS
Waymo has run self-driving cars over 5 million road miles in 25 cities and done billions of miles in computer simulation, which it uses to update its self-driving software on a weekly basis. The Google-launched company has a fleet of Chrysler Pacifica minivans that can navigate city streets in San Francisco and reach full speed on highways.
A pilot program of driverless vans will begin commercial service later this year, picking up paying passengers in Phoenix and branching out from there.
Waymo Chief Executive John Krafcik announced a deal to add 20,000 Jaguar I-Pace SUVs to the fleet, but talks for an alliance with Honda Motor Co to focus on delivery and logistics appear to be dead now that the Japanese automaker is working with GM.
The company also has by far the lowest rate of disengagement—times when an engineer needs to grab the wheel because the bot couldn’t handle it—among all companies testing cars in California, a hub of autonomous research that also requires detailed disclosures. It also reported fewer accidents while testing in California last year: Waymo had three collisions over more than 350,000 miles, while GM had 22 over 132,000 miles.