To Find China’s Best Driverless Technology, Look in Silicon Valley

China’s homegrown search giant, much like its U.S. counterpart, has a division focused entirely on driverless vehicles. And just like its rival, Google-born Waymo, both efforts are based in Silicon Valley.

It’s not only Baidu with a toehold in Northern California. China’s self-driving startups are sprouting major R&D outposts 6,000 miles from Beijing. China’s congested megacities may have a need for self-driving cars, but the expertise is elsewhere.

Just ask founders James Peng and Tiancheng Lou. When they decided over a drink in Beijing three years ago that it was time to leave Baidu’s self-driving car unit, the plan was always to start in California. “Silicon Valley is definitely the place to be,” Peng said in an interview. “That’s where all the talent is. China has a lot of raw talent, but with hardcore artificial intelligence, it takes years to build up. China has work to do.”

Baidu recognized this fact back in 2014 when it created an office in Sunnyvale, California, with 200 engineers and scientists working on A.I. and self-driving software. The tech giant said it’s currently adding 150 more people in a second facility in the same town. That research hub has been an overseas incubator for Chinese programmers and engineers, many of whom gain skills from U.S. institutions and colleagues before returning to China. But some leave Baidu and launch startups such as Pony and two other Chinese-backed self-driving firms, and, while poaching from elite U.S. tech companies.

The push into self-driving cars is part of China President Xi’s mission to make dominance in artificial intelligence a pillar of the country’s economic future. To get there, however, many of China’s biggest tech giants and most interesting startups need Silicon Valley’s knowledge. Engineers working in the U.S.—some Chinese visa holders who went overseas for degrees, some American hires—are a major part of China’s push to develop autonomous vehicles. Didi Chuxing, the ride-hailing giant that pushed Uber out of China, also keeps most of its driverless research in the U.S.

New tariffs imposed by the U.S. have come with a threat to block any company with 25 percent Chinese ownership from buying any American company that makes “ industrially significant technology.” But the trans-Pacific nature of these driverless efforts makes President Donald Trump’s push to wall off American technology difficult, if not impossible.

Trump has also made intellectual property a trade issue, and U.S companies worry about theft. In July, U.S. federal prosecutors accused former Apple engineer Zhang Xiaolang of downloading files containing proprietary information on driverless cars and selling it to a Chinese startup.

Regardless of Trump’s concerns, the Chinese tech companies are already here. Even if the Trump administration succeeds in stopping deals, it won’t prevent Chinese companies from hiring data scientists, software engineers and technical leaders from the likes of Alphabet Inc., Tesla Inc., and other major players in the driverless field. Qing Lu, the chief financial officer of Jingchi, came from Velodyne Lidar. Liang Heng, Roadstar’s chief technical officer, worked at Google and Tesla.

Peng started Pony two years ago with about 20 people in Fremont, near Tesla’s car factory, and now has more than 100 engineers working on cars that drive themselves. He has raised $214 million from investors in both the U.S. and China, with the latest being led by China-based ClearVue Partners and Eight Roads Ventures, an offshoot of Fidelity Management.

The company’s test cars can navigate traffic and drive at highway speeds. Those cars have been on public roads thanks to superior testing conditions found in the U.S. China until very recently had a strict ban on driverless test vehicles. Next year, Peng said, Pony will deploy a test fleet of robotaxis in Guangzhou—about the same time General Motors plans to start a driverless ride-hailing business, most likely in San Francisco. Pony plans to deploy the technology commercially, in either ride-hailing or delivery fleets, within three to five years.

Peng exemplifies the way China’s tech leaders come into their own through contact with U.S. institutions and employers. After an education in both China and the U.S., he worked for seven years at Google as a software engineer developing big data applications and artificial intelligence. He was lured away in 2012 by Baidu, where he led its autonomous-vehicle project in Sunnyvale. That’s where he met Pony co-founder Lou, who worked to develop self-driving cars at Google before the formation of the Waymo autonomous unit.

“I was always fascinated by cars and mechanical things,” Peng said. “The potential really fascinated me.”

Roadstar had a similar path. Founder Xianqiao Tong is a Chinese engineer who got started in autonomy by working on Nvidia’s driver assistance systems and then at Apple before joining Baidu.

To lure more talent, Tong set up a large R&D center in Cupertino, where Apple is based, and gave that office responsibility for self-driving tech. Roadstar is targeting 2020 to deploy thousands of robotaxis in Guangzhou, Tong said in an interview. The cars will be able to drive in Level 4, which means they will be fully autonomous within a mapped-out area.

“The Chinese startups are spending money to hire talent and they are attracting top talent,” said Grayson Brulte, co-founder of autonomous vehicle consulting firm Brulte & Co. “By setting up in Silicon Valley, they are getting the knowledge that they don’t have and they can export it back home.”

Roadstar is working with, a Silicon Valley company that creates the operating system for self-driving cars, to connect its software to lidar, cameras and other sensors, said Renovo CEO Christopher Heiser. The operating system takes what the hardware sees and sends it to Roadstar’s computer brain, which then drives the car. Renovo can also connect Roadstar’s cars to mapping systems and even to a ride-hailing system like Uber or Lyft.

The idea is that even if Roadstar is starting out far behind American tech leaders such as GM’s Cruise or Waymo, the partnership with Renovo could speed up deployment. Roadstar, Heiser said, “learned a great deal working on AV tech in the Valley and have now built an international company that combines Chinese and Silicon Valley features.”

Will the Chinese startups succeed? Several new Chinese automakers made a similar play in electric vehicles in recent years, with mixed results. Faraday Future, based in Los Angeles and partly owned by indebted Chinese billionaire Yueting Jia, has delayed plans to build a plant amid financial trouble and recently started retrofitting an old tire plant. Karma, which was acquired by a Chinese industrialist, is building a luxury plug-in hybrid but sells cars in small numbers.

Earlier this month, however, Chinese-backed EV startup NIO kicked off a $1 billion initial public offering in the U.S. NIO’s chief financial officer, Louis Hsieh, said the company will be in Silicon Valley to develop autonomous vehicles. “There’s not the talent currently in China for autonomous driving,” Hsieh said. “You need lidar for Level 4 autonomy. Most of the talent in the area is in Silicon Valley.”

Thanks to tax credits from the government from the government, China’s automakers have become competitive players in the EV game. Now those same companies, alongside China’s overseas tech firms, are fishing in Silicon Valley’s limited pool for self-driving talent. That will pressure U.S. automakers like GM and Ford Motor.

“With the Chinese entering the market for A.I. and autonomy skills,” said Eric Noble, president of consulting firm The CarLab in Orange, California, “the automakers are having to make exceptions to their normally low pay for engineers. They have to pay up.”

As featured in Bloomberg on September 23, 2018

GM Puts Pieces in Place for Robo-Taxis in San Francisco

General Motors Co. has created its own ride-hailing platform and quietly built one of the largest charging stations in the U.S. to get its Cruise self-driving car unit ready to enter the robo-taxi business next year.

Cruise has installed 18 fast chargers in a parking facility near San Francisco’s Embarcadero, the well-trafficked boulevard along the city’s eastern shoreline where Uber Technologies Inc. and Lyft Inc. have busy drivers. And GM’s self-driving car unit has been testing its own Cruise Anywhere ride-hailing app and fleet-management system, said people familiar with the matter.

The largest U.S. automaker has long planned to start a ride-hailing business using self-driving cars by 2019, but it hasn’t said where the service would start or whether it will work with a partner. These latest moves show that the Golden Gate City is where GM is assembling the pieces to launch its own rival to Alphabet Inc.’s Waymo next year if the Detroit-based company decides against working with an established livery app like Uber’s or Lyft’s.

“It’s an indication that Cruise is getting ready to commercialize autonomous ride-hailing services for the public and it will be in San Francisco,” said Grayson Brulte, co-founder of autonomy consulting firm Brulte & Co. “I imagine they would want to own and operate the service.”

A GM spokesman said only that the automaker is still working toward commercializing its self-driving car service and that the company hasn’t decided whether to own the business or find partners. He declined to comment on the location.

What’s clear is that GM is building the resources to manage both the cars and the interface with consumers. Its ride-sharing platform could be used on its own or be tailored to interface with a partner, one person said.

Cruise has emerged as one of Chief Executive Officer Mary Barra’s top initiatives since GM acquired it in 2016. The business got a big boost in late May when Japan’s SoftBank Vision Fund agreed to buy a 19.6 percent stake in Cruise for $2.25 billion — more than half of which is contingent on having autonomous vehicles prepared for commercial use.

The automaker is also doing some early exploration into whether a tracking stock or an initial public offering would make sense once the business is established, people familiar with the matter said in June.

GM’s fast chargers are near the Embarcadero because it’s a popular location for ride-hailing services. The site will help Cruise quickly recharge its self-driving cars, which are heavily modified Chevrolet Bolt electric vehicles.

In addition to Cruise, GM has been testing new business models beyond traditional automaking. Its Maven car-sharing unit rents Bolts to Lyft and Uber drivers, helping the company learn to use electric vehicles for business fleets, said Sam Abuelsamid, senior analyst with Navigant Research.

“We can expect to see more of this as GM launches automated mobility services,” Abuelsamid said.

GM invested $500 million in Lyft in January 2016. Dan Ammann, the automaker’s president, sat on the ride-hailing company’s board until June.

Most charging stations have a handful of stalls for cars, making GM’s San Francisco site one of the bigger banks in the country, Abuelsamid said. The largest in the U.S. is Tesla’s station in Kettleman City, California, with 40 chargers, said Steve Loveday, a writer and editor with, a website covering the electric car market. Tesla has a few others with more than 20 ports, he said.

GM has also been working with California to get rules in place to facilitate its commercialization pilot. In May, the California Public Utilities Commission cleared the way for companies like Cruise to test self-driving vehicles with the public, but they rejected the request to let companies bill people for rides. Cruise is still seeking approval to do so, said one person.

While most autonomous vehicles, such as those being tested by Uber, have human monitors on board, GM has said it plans to launch its pilot using a version of its Cruise AV with no steering wheel or pedals if they feel the car is safe for public use. It also depends on California regulations allowing the service to run without a safety driver, the company said.

Cruise is also hiring for some key positions. On its website, the unit lists an opening for a head of business operations who will help develop GM’s commercialization strategy for self-driving cars. Cruise is also recruiting for several fleet-management jobs.

The first program will start late next year. GM will gauge progress and look to expand if it’s successful.

“Barra is trying to transform GM from car company to mobility-services company,” Brulte said. “She’s building her legacy.”

As featured in Bloomberg on July 3, 2018

How Driverless Cars Are Going to Change Cities

Self-driving cars could mean better public transit, more green space and less congestion.

As the arrival of driverless cars gets closer, cities are scrambling to get ready. And for good reason: The driverless car promises to reshape the urban landscape as we know it.

Little wonder, then, that the potential changes are creating excitement—and fear—among city planners. As they host test fleets of robot vehicles and figure out how to rework ordinances to prepare for the autonomous future, they’re imagining what life is going to be like when the streets are filled with cars that can largely think for themselves.

ome see an opportunity to create on-demand public transit that gets people where they’re going faster and reaches more of the population. Or open up streets for more green space and greater walkability. Or redirect traffic to make it easier to hold functions like farmers markets.

But, even as they acknowledge the promise, others see possible problems. They warn that robot cars could encourage greater urban sprawl and cut into funding for public transit, widening the divide between the haves and have-nots. And driverless cars won’t be replacing all human-driven cars overnight, meaning an awkward mix of robots and humans sharing roadways.

Whatever the future holds, it will very likely be arriving soon.

“It wouldn’t surprise me if by the end of 2019 we have autonomous vehicles readily part of people’s lives,” says Steve Adler, the mayor of Austin. His city was the first outside of California where Alphabet Inc.’s Waymo, then a Google project, tested early versions of its self-driving technology. He adds, “The technology is coming sooner than people think.”

Here’s a look at some of the changes that may be in store for cities.

Smarter public transportation
Some urban planners envision integrating autonomous cars with existing public transit, making the whole system more flexible and responsive.

A likely starting place is on-call robot taxis married with smartphone apps that let users plan the most efficient routes across town. For instance, a commuter might check the app and see that the quickest path is taking a rental bike to the train station, riding for 20 minutes, then finishing up with a robot taxi for the final 2 miles to the destination.

In another combination of autonomous vehicles and transit, vehicles would actually anticipate commuters’ needs. The startup Moovit, which tracks anonymized user data to create a real-time picture of public-transit use, could use such data to help robot taxis know where and when to deploy to meet demand, predicts co-founder and Chief Executive Nir Erez. The operating system might see that 300 people are on board a commuter train set to arrive at noon. So it would send enough robot taxis to the station to cover the probable number of taxi riders, based on past usage statistics.

Robot cars could also help riders in underserved areas. After being used for private trips during rush hours, the cars could be deployed in parts of the city with limited public transportation so that residents could use them for essential travel, perhaps even subsidized by the city to reduce cost.

These setups offer a rare chance for a strong public-private partnership in transit—because companies have a financial stake in keeping the cars as full as possible, just as cities want to offer residents as many commuting options as they can.

“We’re going to want [that car] running all of the time at capacity,” says Glen De Vos, chief technology officer at auto-tech supplier Aptiv PLC. “If you can bolt on public-transportation services on top of [private service], it gives you a bigger customer base and more opportunity to essentially be running those vehicles at capacity all time.”

For cities, which often don’t have the latest technology, creating the infrastructure to allow such a network takes preparation. In Las Vegas, Aptiv has joined with Lyft Inc. to test self-driving cars to better understand what’s required to make a ride-hailing system work with robots.

“A lot of times, people completely overlook that the municipality will play a critical role in how all of this is implemented,” according to Mr. De Vos.

One of the open questions about how the technology will ultimately be used is whether robot vehicles will be more like a public utility, with cities deciding where and when the vehicles operate, or whether these vehicles will be more akin to chauffeured cars operated by private fleets.

In January, Ford Motor Co. announced it acquired a startup called Autonomic to help create a so-called Transportation Mobility Cloud that could essentially serve as an air-traffic control center for a city trying to manage different transportation providers, such as public buses and privately owned robot taxis.

Traditionally, each mode of transportation has been trying to ensure it is working in the most efficient way possible, says Marcy Klevorn, president of Ford Mobility.

“You can’t solve the problem by having everything optimized for itself,” she says. “One of the things we want to do is help the different modes of transportation talk to each other.”

Less parking, more space
Autonomous cars can drop people off and then go somewhere else to park—or to shuttle other people around. That means less need for parking space, which could open up huge possibilities for space-crunched downtowns. Some cities have as much as 30% of land devoted to cars for roads and parking, according to Brooks Rainwater, director of the Center for City Solutions at the National League of Cities.

Some see the advent of autonomous cars as the spark to reimagine a city with pedestrians at the center of development—whether that involves making wider sidewalks, adding green space and parks or converting former downtown parking-garage towers into housing or retail space.

Another change could be in the design of buildings. Half of a new building’s footprint is typically devoted to parking, says Ryan Snyder, a principal at consultancy Transpo Group and a faculty member at the University of California, Los Angeles, urban-planning department. If fewer spaces are needed for autonomous cars, those spaces could be turned into retail or living space—potentially leading to lower costs for residents and businesses.

Changing streetscapes
As autonomous vehicles take over the roads, they will learn to coordinate traffic flow. Autonomous vehicles could be directed to pull out of the way of emergency vehicles or public buses to create virtual lanes for those higher-priority vehicles, for instance.

But cities could also begin to use streets and sidewalks in a more flexible way, changing the dynamic of communities, Mr. Snyder says. For instance, streets could more easily be used for events like farmers markets, because automated vehicles could find routes around the blocked-off areas without causing traffic jams.

Sidewalks might also change in front of large office buildings, as robot taxis and shuttles pick up and drop off huge numbers of passengers. Planners may create wider pick-up and drop-off zones, perhaps indented to allow traffic to flow easily around them. The curbs may also have sensors that can notify an autonomous vehicle when it is safe to pull over, says Grayson Brulte, who advises governments on driverless technology.

The congestion question
Some proponents of driverless cars believe the shared vehicles will cut down on clogged streets.

Research by Larry Burns, the former head of research and development for GM and a consultant for Waymo, suggests that a community needs only a small number of robot taxis to handle its transportation needs. In research for Columbia University’s Earth Institute, he found that if a city’s population density is greater than 750 people per square mile—the level of most U.S. cities—then it can ensure service with a fleet of robot vehicles amounting to just 15% of its current total of conventional cars.

But some experts aren’t so sure robotic cars will ease congestion. Bruce Schaller, an expert in transportation planning, published a report last year that suggested ride-hailing services in New York City added to congestion on the road, even as the number of taxi trips decreased, as people gravitated away from public transportation. He says that there’s a real concern that autonomous vehicles will lead to lower fares and more riders, creating “more trips in already-congested cities.”

In Austin, Mr. Adler says he’s generally positive about autonomous technology’s potential benefits but says he could envision it leading to greater congestion problems. For instance, he imagines a resident who typically takes three children to different events and runs errands in a single vehicle. In a future with driverless cars, the resident might decide to send each child to those activities in separate robot cars while using another vehicle to run the family errands.

New revenue streams
Governments, which already tax gasoline and car purchases, may likely turn to taxing autonomous vehicles for using the roads, through perhaps a usage fee.

One idea that’s emerged is a so-called zombie-cars tax, which was first proposed in Massachusetts last year, that would aim to tax vehicles on a per-mile fee to avoid people letting their cars drive around empty.

Mr. Snyder, the urban-planning consultant, for example, suggests cities might charge a fee to have curb access in high-traffic areas or give preference to vehicles with multiple people, such as a shuttle.

Driving the rich and poor apart
While some believe enhanced public transportation will provide benefits for communities that have limited public transit now, others worry the technology might favor the rich.

Lauren Kuby, a City Council member in Tempe, Ariz., which had seen a test fleet of Uber Technologies Inc.’s self-driving vehicles, says she’s intrigued by the possible benefits of the vehicles. But she fears that “AVs could encourage sprawl, especially if people own their own AVs.” In this scenario, Ms. Kuby says, “AVs could siphon off ridership from public transportation, eroding revenue, which then justifies cutting service, hurting those who depend on it but who cannot afford the higher cost of ride-sharing AVs.”

Similarly, Richard Florida, an expert in urban planning and a professor at the University of Toronto, expects that autonomous cars will push the poor from middle suburbs out to exurbs, because the ease of using the cars will lure wealthy people to move to suburbs that haven’t seen reinvestment in more than a generation.

“Self-driving cars are likely to make those [middle suburbs] more valuable and turn them from working-class areas to more upscale areas,” he says. “You’ll get a metropolitan area where more and more of the less-fortunate population is pushed out to the periphery.”

There are also concerns that self-driving vehicles will cost people their jobs, such as those who currently drive taxis, Ubers or public buses. But many companies believe that humans won’t be displaced entirely soon, noting that there will be a need for people to maintain the fleets and monitor them.

A matter of safety
Perhaps the biggest unknown for driverless vehicles—and the thing that could most delay their arrival—is safety, a renewed concern after a test vehicle by Uber was involved in a fatal crash earlier this year in Tempe.

Columbus, Ohio, was picked in 2016 by the U.S. Department of Transportation as a test city for advanced transportation technology. The city planned to deploy an autonomous shuttle around an indoor-outdoor shopping complex. But it has reconsidered the route after realizing some of the current technology’s limits.

The problem was that the vehicles they were looking at couldn’t go fast enough to keep up with traffic, and the city was concerned about the need to make a left-hand turn against traffic, a driving move that has proved difficult for developers to implement safely, says Brandi Braun, the city’s deputy innovation officer. The program is now re-evaluating where to deploy such shuttles.

As featured in the June 26, 2018 edition of the Wall Street Journal

Why GM and Waymo Rely on Allies in Self-Driving Race

The two leaders in autonomous vehicles get by with a lot of help from their friends.

An automaker like General Motors Co. brings two advantages to the development of self-driving vehicles: knowledge of how to build a car and the factories to do it. Silicon Valley’s biggest entrants into autonomous vehicles, particularly Alphabet Inc., have legions of coders and piles of cash.

Now GM and Alphabet have found someone else to handle the aspects of this historic undertaking that the companies are least adept at doing themselves.

Carmakers hate risking billions of dollars more than they do already to compete in a low-margin industry, and so SoftBank stepped forward on Thursday to drop $2.25 billion into GM’s Cruise Automation unit. That will help finance the rollout of a driverless ride-hailing business next year. Google’s parent company doesn’t run factories, and so on Thursday the tech giant agreed to buy tens of thousands of minivans made by Fiat Chrysler. The vehicles will be outfitted with autonomous systems designed by Alphabet’s Waymo unit.

“They both need to invest in these technologies but they won’t get a return for years,” said Eric Noble, president of the CarLab, a consulting firm in Orange, California. “Right now Waymo doesn’t need to build their own cars, and GM can spend $2 billion on vehicles that make money.”

The decision by SoftBank Vision Fund to buy nearly 20 percent of GM Cruise Holdings is a significant coup for the Detroit automaker. This is a company that pulled out of big car markets like Europe, Russia and India because the cash spent on new models there provided little return or losses.

Self-driving cars cost a fortune without generating any revenue at the moment, and GM Chief Executive Officer Mary Barra doesn’t want to invest in anything that falls short of her push for 10 percent operating margins. Money is less of a constraint for Waymo and its parent company, which has more than $100 billion in cash.

GM was already spending $1 billion a year to fund Cruise and, as part of the SoftBank deal, has moved to put in another $1.1 billion. Getting someone else to share the burden is a big help, and the huge tech investor also has stakes in ride-hailing giants Uber and Didi, opening the possibility of new alliances.

SoftBank approached the automaker and did exhaustive technological research before putting pen to paper on a deal, said a person familiar with the matter. While GM doesn’t necessarily need the cash, the company’s executives figured that bringing on SoftBank would represent a ringing endorsement in the tech world. In addition to backing a slate of ride-hailing startups, SoftBank has invested in two chipmakers supplying many autonomous efforts: Nvidia and ARM Holdings.

“SoftBank validates what Cruise has been doing,” said Grayson Brulte, co-founder of Brulte & Co., a consulting firm that specializes in autonomous strategy. That’s important, he added, because some in Silicon Valley see old industrial companies as dinosaurs driven by cautious engineers, not entrepreneurs.

Buying Cruise for $581 million in cash two years ago was GM’s way of catching up to Silicon Valley in the rush to bring artificial intelligence to cars, and the value of the San Francisco-based startup has been on the rise ever since. Adding in bonuses and other payments to key employees, the acquisition by GM was said to have cost closer to $1 billion. SoftBank’s investment values Cruise at $11.5 billion today.

“GM will obviously have the majority of the capital in Cruise,” said Michael Ronen, managing partner of SoftBank Investment Advisers. “The sale and the fact that there is an acquaintance should help make an introduction.”

While GM took in billions of dollars, Waymo moved to get more cars. The latest deal with Fiat could end up expanding Waymo’s existing fleet of Chrysler Pacifica minivans a hundredfold. The new vehicles will form the backbone of a driverless ride-hailing service, which is slated to debut later this year.

Questions remain about the timeline for expansion. A statement released Thursday said Waymo would buy “up to” 62,000 vehicles, without details on when. A fleet that size would be large enough to offer a scaled ride-hailing service in two to three markets, according to one industry insider.

John Krafcik, Waymo’s CEO, has a favorite catchphrase: “We’re not building cars; we’re building better drivers.” The slogan is a sales pitch for Waymo’s package of software and sensors, which many experts characterize as the best in class. It’s also a dog-whistle to the car industry—a way to dampen concerns that Alphabet, the world’s third largest company, is planning to manufacture its own vehicles.

That has left Waymo to create a fleet for its futuristic driverless business using existing vehicle models such as the Chrysler Pacifica and the Jaguar I-Pace. For now, at least, Waymo integrates its software into cars designed with gasoline engines and a driver in mind. GM uses a modified version of its own Chevrolet Bolt, an electric car that has more power on board to handle the intensive computing requirement. The version used by Cruise in current road tests is a third-generation car that will eventually have the steering wheel and pedals removed.

A new test of Waymo’s strategy of relying on partners to make cars could come soon. Krafcik has said a pending deal between Waymo and Honda will produce an entirely new vehicle designed for use in a driverless business. But that new vehicle hasn’t surfaced in the almost year and a half since the companies announced their talks.

For years before the project was re-branded as Waymo, Google weighed the option of making its own cars and even produced a prototype. Ultimately, Google’s co-founders opted to work with existing carmakers. In 2015, shortly after Krafcik joined, Waymo tried to cut a major deal with Ford. He told Bloomberg News earlier this year that the talks collapsed when Alphabet decided it bore too much capital risk in the arrangement.

Part of Waymo’s announcement on Thursday included a pledge to sell self-driving cars for private ownership, something GM hasn’t yet discussed. The technology is still extremely expensive, and some experts doubt ownership will be competitive with ride-hailing services built on driverless vehicles. “By the time personal car ownership is feasible, it won’t be desirable,” said Anne Widera, a self-driving consultant who has worked at Waymo and Uber. Selling cars outfitted with self-driving sensors would also risk that the intellectual property on board could be copied.

In a way, Waymo’s tactic of finding someone else to make its cars fits the classic mold of its parent business: controlling the valuable artificial intelligence and data running through self-driving cars, without making the hardware. That may change, though, as parts of Alphabet’s empire have recently shifted toward creating more hardware—Google’s own gadgets and cloud-computing chips, as well as Waymo’s sensors—to exert more control over the product.

For GM, on the other hand, seeking a partner with deep pockets is consistent with its established practice of not risking billions in cash on profits that are years away. Both leaders in self-driving cars are sticking to what they already know and getting help from others.

“You can’t go it alone in autonomy,” said Brulte. “It’s too expensive and only a few players even have the capabilities.”

As featured in Bloomberg on June 1, 2018

Who’s Winning the Self-Driving Car Race?

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 U.S. 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.

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 U.S. 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.

After interviewing executives and technology experts and reviewing announced plans, Bloomberg has taken a snapshot of the race to develop the self-driving car. Our estimated time of autonomy is based on Level 4, the prerequisite for launching businesses with self-driving tech.

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 recently announced a deal to add 20,000 Jaguar I-Pace SUVs to the fleet and signaled that an in-the-works alliance with Honda Motor Co. could focus on delivery and logistics.

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.

GM’s Chevy Bolt can navigate the busy streets of San Francisco at speeds up to 25 miles per hour. The Detroit automaker is so confident that it plans to run a ride-hailing pilot next year in a car with no steering wheel or pedals, something only Waymo has done in road testing.

A handful of major players have demonstrated similar driving capabilities. It’s hard to say anyone has an edge. But there are two big advantages for GM.

SoftBank made a $2.25 billion investment in GM’s Cruise Automation unit on May 31, in addition to a fresh $1.1 billion from GM. The new cash is meant to help GM launch a self-driving business, and it marks a big vote of confidence from a deep-pocketed investor. SoftBank picked GM over a slew of startups and rival automakers. The partnership could also get GM a warmer reception from the ride-hailing firms Uber Technologies Inc. and Didi Chuxing, since SoftBank owns a piece of both.

Unlike startups and tech competitors, GM also has a factory north of Detroit that can crank out self-driving Bolts. That will help the company get manufacturing right and lower costs without relying on partners. Right now, an autonomous version of the car costs around $200,000 to build, compared to a sticker price of $35,000 for an electric Bolt for human drivers.

Where GM lags Waymo is speed. GM doesn’t test faster than 25 miles per hour, deeming that the safest top speed. Kyle Vogt, founder and chief executive of GM’s Cruise Automation unit, said his program will soon be using new Lidar developed by Strobe, which the automaker acquired last year. Lidar sends out laser beams to map the road ahead and guide the car, and Strobe’s version is smaller, cheaper and can see farther ahead than GM’s existing equipment. That will enable faster driving.

The new equipment will also cut costs. Lidar alone on the current generation of autonomous Bolts costs about $30,000 a car, Vogt said in November. When GM starts using Strobe, Vogt said, the cost will drop to “hundreds of dollars.”

Before the SoftBank investment, GM planned to spend $1 billion of its $8 billion annual capital expenditure budget to develop self-driving cars and mobility services. GM has not decided whether to run its ride-share pilot, slated for late 2019, on its own or to join forces with an established player. It’s worth noting that the automaker already has a stake in Lyft Inc.

There’s a big caveat with GM: It leads all companies that test in California when it comes to fender benders. Last year, Cruise had 22 of the 27 accidents in the state involving driverless cars, and it experienced five of the seven incidents reported this year. The accidents have mostly been minor and not the fault of GM’s car. In an interview, GM President Dan Ammann attributed the higher incident rate to the greater number of miles traveled in San Francisco’s busy streets.

Staying Close
Mercedes-Benz started selling an adaptive cruise-control system in the late 1990s on its flagship S-class sedan. The system could sense when the car was bearing down too quickly on someone’s rear bumper up ahead.

Today, Mercedes models with Intelligent Drive get closer to real self-driving because the system can help steer clear of pedestrians and avoid other accidents. It’s one reason why Navigant Research, which studies auto technology, ranked parent company Daimler third behind Waymo and GM.

Those systems help today’s drivers. For the cars of tomorrow, Daimler works closely with Robert Bosch Gmbh and will be using a system from Silicon Valley intelligent computing company Nvidia Corp. The test cars can drive at Level 4 autonomy or even Level 5, which means the car doesn’t need a steering wheel or pedals to operate.

The company has been testing V-Class vans around the roads of Boeblingen, near Stuttgart, where Mercedes-Benz has a research center. The automated vans run through purposefully challenging situations such as morning traffic. The technology is already at Level 5, Daimler’s head of development, Ola Kaellenius, said in an interview, although a recent report by Bloomberg New Energy Finance put the target date for the company after 2020.

Before those systems are on the road, Kaellenius said Mercedes will offer Level 3 autonomy as an option in the cars it sells by 2021. This means that the car can handle most driving while prompting the driver to take over in certain situations that the computer can’t handle.

Fully self-driving cars will be on the road at the same time, he said, but would be used for ride sharing services, because they would be too expensive for retail customers to buy. “The logical business case there is a mobility service, a robo-taxi type of thing,” Kaellenius said. “You amortize the cost through the saving on the driver.”

No one would have imagined a decade ago that a vestige of bankrupt GM parts unit Delphi would be a player in the self-driving revolution. But Aptiv Plc, the former Delphi Automotive that split out its powertrain business, has emerged as a player to be watched, said Grayson Brulte, co-founder of Brulte & Co., a consulting firm that specializes in autonomous strategy.

Aptiv has invested heavily in self-driving technology, buying software maker Ottomatika along with stakes in Lidar makers Innoviz, Leddertech and Quanergy Systems. Its biggest deal was buying NuTonomy, which has been running tests of driverless cars in Boston and Singapore at city speeds. The company also ran a robo-taxi demo in Las Vegas during CES.

The company has been testing ride-hailing services in Singapore since 2016 and will have them operational in 2021, according to Navigant. Aptiv has been working with Audi AG and Bayerische Motoren Werke AG cars to develop its technology.

he same day in late November that GM showed off its self-driving Bolt in San Francisco, Zoox Inc. had its own car driving through the city’s winding streets and heavy traffic. Zoox has about 250 engineers working to develop it. Its self-driving Toyota Highlander SUVs run on the same busy streets that GM uses to test the Bolt. But Zoox’s car can also drive at highway speeds, said Bert Kaufman, head of corporate and regulatory affairs for Zoox.

The company plans to have its car ready for passengers in 2020, Kaufman said, and then will work on getting passengers in the car shortly after.

The challenge for Zoox is getting more funding to build its car. The company has raised more than $280 million but needs an additional cash to finish its car, Kaufman said. It can cost $1 billion for car companies to finish a new model. Established carmakers have their own vehicles, and Waymo has partnerships with manufacturers.

Renault-Nissan Alliance Chairman Carlos Ghosn brags that the company has sold more cars with adaptive safety than anyone. Nissan’s ProPilot system stops the car if a vehicle ahead stops quickly and it keeps the car in its lane.

That system was developed on the way to a full autonomous system, Ghosn said in an interview earlier this year. Right now, Nissan is testing a fully-autonomous car in Palo Alto, California. Renault recently showed off a long, sleek, copper-colored concept car called the Symbioz that can go 80 miles per hour in full self-drive mode.

The car still requires a driver to turn on autonomous mode, at which point the steering wheel retracts. With electric motors in front and back and measuring a lane-hogging six feet in width and 16 feet in length, Symbioz isn’t exactly the car that will go on sale.

In March, Nissan tested an electric Leaf in a ride-hailing pilot in Yokohama, and Renault will do the same later this year in suburban Paris and Rouen with the electric Renault Zoe.

While the alliance’s technology is impressive, Ghosn sounds cautious. The French-Japanese conglomerate plans to test a self-driver on the road around 2020. That car will be on highways requiring only occasional driver intervention. By 2022, Renault-Nissan will have fully autonomous cars in the road, according to the Alliance 2022 plan.

“We will all be coming to market with this by 2022,” Ghosn said. “You’ll see all of the carmakers with some level of autonomy.”

Audi, the luxury brand owned by Volkswagen AG, already has the most advanced autonomous car for sale in the A8. The car’s Traffic Jam Pilot uses Lidar to see the road and lets drivers go completely hands-free at speeds up to 37 miles per hour.

The company’s future work promises to be much more advanced. Audi, which is working with Nvidia, is targeting a fully autonomous car in 2020; the report from BNEF put the date to reach Level 4 at 2021. The company hasn’t said whether it will be tested in a service or by its own engineers.

Volkswagen also has an agreement with Aurora, the startup whose founders have serious cred in the world of self-driving software. Its technical leaders are Urmson, a founder of Google’s self-driving effort, Sterling Anderson, who ran Tesla’s Autopilot program, and Drew Bagnell, formerly a leader on Uber’s autonomy team. The company has kept mum as to how it will go to market.

Following the Pack
BMW has a fleet of about 40 cars that can drive at Level 4 autonomy. The cars are driving around Munich and in California.

The maker of Ultimate Driving Machines doesn’t see selling the ultimate riding machine soon. The company is testing completely self-driving cars that they have developed with partner Intel Corp., which acquired sensor maker Mobileye, and with German parts maker Continental AG. Fiat Chrysler Automobiles NV recently joined the partnership, which plans to have self-driving technology in production vehicles by 2021.

The self-driving BMWs aren’t ready for the highways, BMW Chief Finance Officer Nicolas Peter said at a press event in Detroit. “This technology requires, from our perspective, some more time to have really fully automated cars on the road,” Peter said. There are currently about 1,000 people on the company’s research and development team.

No one can count Toyota Motor Corp. out. The company started developing self-parking technology in 1999 and installed it in the Prius in Japan in 2003, enabling the car to park with no input from the driver.

Toyota kept mum about capabilities until CES in January, when the company showed off a boxy shuttle concept called e-Palette. The Japanese automaker can make the self-driving shuttle in three sizes and it will debut publicly at the Tokyo Olympics in 2020 as a ride-hailing shuttle, said Gill Pratt, who runs Toyota Research Institute.

Still, Toyota’s message was one of patience. When Toyota tests its self-driving car in 2020, it may not have a driver—or it may still have two people minding the front seats and the controls, Pratt said.

He thinks a lot of carmakers and tech companies are hyping the true state of self-driving vehicles. “We will get there,” Pratt said, “but I can’t tell you when.”

Ford Motor Co. has been considered a laggard, especially since former CEO Mark Fields was fired last year, in part for not having a cohesive vision for autonomy and future mobility. But it’s not fair to say Ford is flat-footed. The company gets its technology from Argo AI, the artificial intelligence company in Pittsburgh that Ford paid $1 billion to take a significant stake last year. That investment brought in very good capabilities, said Sam Abuelsamid, an analyst with Navigant Research.

The Argo team has a strong lineage. The startup is the brainchild of Bryan Salesky, who was director of hardware development of what is now Waymo, and Peter Rander, who was engineering lead at the Uber Advanced Technologies Group. Salesky’s experience dates back to the beginning of self-driving cars: He was senior software engineer on the winning team in the 2007 autonomous vehicle challenge funded by the Defense Advanced Research Projects Agency (Darpa).

Ford is now testing its third-generation Fusion sedan with Argo’s technology. Even with Argo, however, Ford got a late start. When Ford bought the startup in February 2017, the company had few employees and Salesky spent a year staffing up.

The plan is to have self-driving cars with Level 4 capability in 2021, said Sherif Markaby, Ford’s vice president of autonomous vehicles and electrification. The car will be purpose-built for autonomy that has no steering wheel or pedals. While Ford is a couple of years behind GM and Waymo, the company is experimenting with Domino’s Pizza to deliver pies and with Postmates to deliver other cargo. Ford is also preparing a Michigan factory to make autonomous vehicles.

Volvo Cars AB has a goal of eliminating all injuries to passengers in its cars by 2020. That looks unlikely, but the company has 500 people developing its own self-driving technology. Right now, its Pilot Assist gives a driver 15 seconds with hands off the wheel, keeping the car in lane and managing the distance to a vehicle ahead.

The company is testing its technology with a few families in Gothenburg, Sweden. The tests will start with driver assistance technology and move up to more advanced systems over time.

The automaker, owned by China’s Zhejiang Geely Holding Group, is developing more autonomous technology but won’t be ready to go to market until 2021, according to a report from Navigant. Volvo is also working with Uber to develop autonomous systems for the XC90 SUVs.

If you’re coming from behind, might as well find a partner to usher things along. Korea’s Hyundai Motor Co. will have an advanced safety system on the road this month that allows drivers to take their hands off the wheel for 15 seconds.

The company isn’t ready to test truly self-driving cars, said Jinwoo Lee, vice president of Hyundai’s Intelligent Safety Technology Center in Korea. To get there, Hyundai decided to work with Aurora, the technology startup that is working with VW, as well as with prolific partner Nvidia, maker of artificial intelligence computing systems.

Hyundai plans to test its autonomous system in a small city in 2021. “We take very conservative steps,” Lee said in an interview. “We want to really test it and validate it.” There are no current plans to test autonomous technology on public roads, and the company said it doesn’t think it will be ready for market until 2025.

Unusual Cases and Dark Horses
Most traditional carmakers rushed to get a self-driving vehicle program once Waymo and Uber started working on it.

Automakers feared that low-priced self-driving taxi services would replace car ownership and that they would just supply the hardware, just as Foxconn Technology Co. makes the phone for Apple Inc.—and Apple makes the real money selling content and services.

Enter Fiat Chrysler. The automaker supplies the minivans to Waymo and helps integrate the technology, yet has little development of its own. The company has started working with Intel and BMW but will not try to establish leadership alone.

Ride-hailing giant Uber Technologies Inc. placed two huge bets on autonomous vehicles, first hiring top employees from Carnegie Robotics in 2015 and then acquiring the self-driving trucking startup Otto in 2016. But the program has been mired in controversy after a high-profile lawsuit and a then fatal collision.

Throughout 2015, Uber recruited top robotics talent from Carnegie Mellon as it built its Advanced Technologies Group in Pittsburgh, Pennsylvania. That group, led today by former Carnegie Robotics co-founder Eric Meyhofer, has spearheaded Uber’s self-driving car program. In an effort to catapult Uber to the front of the autonomous-vehicle arms race, Uber acquired Otto Trucking in August 2016, buying a team filled with former employees of Alphabet’s self-driving car unit.

Less than a year later, Alphabet retaliated, filing a trade secrets lawsuit against Uber. The lawsuit revealed that Anthony Levandowski, who co-founded Otto after working on Google’s self-driving car, then headed Uber’s driverless-car development effort, had downloaded copies of work emails and sensitive files at Google. Levandowski, along with Otto’s other three co-founders, have all since left Uber. The ride-hailing company settled the lawsuit this year for $245 million in Uber equity, but not before the lawsuit distracted its leaders and placed a black mark on its autonomous program.

Then in March, bad turned to tragic when a self-driving Uber struck and killed a pedestrian in Tempe, Arizona. Uber quickly suspended all of its public autonomous-vehicle testing as it awaits the results of that investigation.

If Tesla Chief Executive Elon Musk can get the world’s most powerful rocket off the ground with his company SpaceX, maybe he can also get cars to drive themselves. Tesla’s Model S and X both have Autopilot, which can pass other cars and change lanes with no hands on the wheel. While it’s not a fully autonomous system, it has given Tesla a lot of data about how its cars perform when driver-assistance software is engaged. Tesla has been under fire lately, after another person died in an accident while using Autopilot.

Where things get murky is that Musk eschews the Lidar systems that most carmakers and tech companies are using. He says he wants to develop more advanced imaging to give his cars a much better pair of eyes.

Musk wants to use cameras and develop image-recognition capabilities so cars can read signs and truly see the road ahead. He has said Tesla is taking the more difficult path, but if he can come up with a better system, he will have mastered true autonomy without the bulky and expensive hardware that sits on top of rival self-driving cars.

“They’re going to have a whole bunch of expensive equipment, most of which makes the car expensive, ugly and unnecessary,” Musk told analysts in February. “And I think they will find themselves at a competitive disadvantage.”

Analysts from BNEF project that Tesla will be able to field Level 4 cars in 2020, although that timetable could be subject to change now that the company entered into a public spat with federal safety investigators over the fatal crash involving Autopilot.

China’s largest search engine has been developing self-driving software for five years. Its Apollo software system for autonomous vehicles is open-source, and the company has invited all takers to work together to test cars and collect data. Baidu started testing the first version of the software in late 2017 on public roads and showed off version 2.0 at CES in Las Vegas in January.

The Chinese government in March gave Baidu permission to test cars on 33 public roads in the suburbs of Beijing, making it first on the roads in China. The company’s goal is to test the system in buses made by Chinese manufacturer King Long later this year and, by 2020, to have autonomous vehicles capable of Level 3, meaning the car controls itself at highway speeds and tells the driver to take over in complex situations. Baidu’s initial self-driving cars will be developed with China’s Chery Automobile Co.

Baidu also has a 2021 target to produce Level 4 autonomous cars in partnership with Chinese automaker BAIC Group.

As featured in Bloomberg on May 7, 2018