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

Driverless Cars are Growing in Number, but Makers Don’t Want to Reveal How they Sometimes Fail

On March 18, a robot-driven Volvo operated by Uber hit and killed a pedestrian in Arizona.

Advocates for automation maintained that the tragedy shouldn’t detract from the likelihood that driverless technology is eliminating human error and making driving safer. But the death, and a fatality five days later that involved Tesla’s Autopilot driver-assist system, were unusual in another way: They were rare instances in which driverless-car companies were forced to share data about how their systems work, in this case with investigators.

A schism is developing in the driverless-car world — but not between fans and foes of robot cars.

Instead, on one side are driverless-car advocates who believe data transparency will lead to safer deployment of driverless vehicles and help alleviate public fears about the strange and disruptive new technology. On the other are some automobile and technology companies that, for good commercial reasons perhaps, prefer to keep their workings cloaked in mystery.

The lack of transparency about the workings of sensors, logic processors, mapping systems and other driverless technology, like the debate over robot-car regulation, could shape public perception of the nascent industry, said Bryant Walker Smith, a law professor at the University of South Carolina.

“Essentially, [the public will be] looking to see whether these companies are trustworthy,” he said.

The stakes are high. Driverless-vehicle technology is expected to roil major segments of the world economy and market forecasters predict several hundred billion dollars a year in revenue for the winners.

Already semi-autonomous technologies such as Tesla Autopilot are operating on public roads, with deployment of driverless ride-hailing services from Waymo (a subsidiary of Google’s parent, Alphabet), Lyft, Cruise Automation and others due this year or next.

To understand the controversy, and the effect on public safety, it helps to know what data are being collected and how such information might be put to use if it were made more visible.

Most people are familiar with the idea of a “black box,” technically known as an event data recorder. They’ve been used for decades in the airline industry to help investigators evaluate crashes. But similar devices have become common in cars and trucks to record data on speed, steering, braking and the like over the few seconds before, during and after a crash.

The data issue today goes far beyond the black box, however. It now extends to cutting-edge robotic systems that use sophisticated sensors, complex computer chips and advanced software to take over some or all of the driving tasks that a human being would normally perform. The technology companies that create them are taking different approaches to engineering the systems. Industry and government have yet to determine how to use the data they generate after a crash.

In the Uber death, a video recorded by a dashboard camera — turned over to and released by Tempe, Ariz., police — showed the driverless-car system failed to brake for the pedestrian. It left open the question of whether the system sensors might have failed to notice the pedestrian at all.

Uber’s reaction was to apologize, then dip into some of its $15 billion in investment capital to pay the victim’s family in a legal settlement, thus avoiding a public trial.

Uber declined to make a company executive available to discuss data and transparency on the record, as did Waymo, Tesla and Lyft. Other companies — including Zoox, Nutonomy and General Motors, parent of Cruise Automation — agreed to talk.

Even driverless-car advocates are growing concerned about the silence from the industry’s major players. Grayson Brulte, a well-known consultant in the driverless industry, worries that recent polls have consistently shown the public is wary about driverless technology, while companies appear reluctant to engage with the public.

“They’re like Rapunzel up in the tower,” he said. “They have to let down their hair and climb down.”

Alain Kornhauser, who heads the driverless-vehicle program at Princeton University, said he believes that robot cars will improve safety, reduce driver stress, add productive time to the day and offer the elderly and disabled more independence. But the technology is far from perfect, he said, and some robot-induced deaths are inevitable.

Rather than wall off the lessons learned in fatalities such as the recent Uber and Tesla incidents, Kornhauser said, the companies should be sharing crash data with one another, with outside researchers and with the general public. And not just black-box data, but driverless-system data as well. That would make driverless cars safer and faster, he said.

“Uber should not gain a safety advantage over everyone else because they were involved in this crash,” Kornhauser said. “All of the video, radar, lidar and logic trails in the seconds leading up to the crash should be released to the public.

“If this reveals some of Uber’s intellectual property, so be it. If they want to protect their intellectual property, they shouldn’t crash on public roads.”

Current policy in some ways confuses the situation further, Kornhauser said. After the Tesla Model X fatality in Mountain View, Calif., on March 23, Tesla Chief Executive Elon Musk defended the Autopilot system and seemed to blame the driver. He also repeated Tesla safety numbers that statistics experts have described as problematic. Musk’s words caused a public spat with Robert Sumwalt, head of the National Transportation Safety Board, who kicked Tesla off the investigative team.

Kornhauser suggested that transportation officials might be better off allowing objective data to be released while banning speculation that might favor a company or other party involved in a crash.

Karl Iagnemma, chief executive of driverless-technology company Nutonomy, said he believes a solution is possible. There is a concern, as in any other industry, that “if you share knowledge with a competitor, you might enable them to move more quickly.” But if the trade-off is a higher level of safety, he said, “I’m fine with that.”

Elements of the aviation safety model could be applied to driverless technology, he said. Airlines face far stricter requirements than automobiles on black-box data, and they confidentially share data with one another to improve safety. Eventually, government investigators reach conclusions and some of the data is made public.

“The promise of sharing data is that if data can be shared industrywide there’s a chance that you will not have that same crash happen again,” Iagnemma said. If federal authorities required such data from all industry players, “we would certainly use that information to improve our systems, absolutely.”

The information released to the public need not be highly technical and should avoid being defensive, according to law professor Smith. His suggestion: “Something went wrong. These are the things that went wrong. Here’s why they went wrong. Here’s what we’re going to do about it.”

But there’s no sign of that happening anytime soon, voluntarily or via regulation. Trump administration agencies have not said much about driverless-vehicle policy. Legislation is working its way through the Senate that would allow manufacturers to sell thousands of driverless cars each year to individuals, but the bill barely touches on data transparency. A similar bill quickly passed the House of Representatives last September.

The nonprofit Advocates for Highway and Auto Safety, which represents a broad range of safety advocates, is pushing for changes in the Senate bill, including the creation of a public database that would publicize defects and operational issues with commercial driverless and driver-assist systems — similar to the National Highway Traffic Safety Administration’s safercar.gov site.

In a letter sent recently to Mitch Bainwol, chief executive of the lobby group Alliance of Automotive Manufacturers, the safety group noted that the Senate bill requires only that driverless-car companies “describe” their systems. “As such, manufacturers will continue to submit slick marketing brochures … instead of providing actual data and documentation that will allow the public and NHTSA to accurately evaluate the safety of the technology,” the letter said.

“We are pro technology,” said Cathy Chase, the advocacy group’s president. “We do want to see this technology succeed. We do want to see fewer people being killed and injured.”

But if driverless-vehicle companies retain full control of system safety data, she said, “you have the fox guarding the henhouse.”

As featured in the April 30, 2018 edition of The Los Angeles Times

BMW and Daimler Merge Mobility Services Divisions

BMW Group and Daimler AG will merge their respective mobility service divisions into a 50/50 joint venture, while still maintaining competition within their core businesses.

The venture is a “clear sign” that the mobility market is “maturing,” Grayson Brulte, a consultant and co-founder of Brulte & Company told Auto Finance News.

“Across the board look for M&A activity in autonomy, ridesharing and carsharing,” he said. “There are too many companies competing for the same piece of the pie.”

The venture is designed to combine services in the five areas: On-demand mobility, carsharing, ride-hailing, parking, and charging. For example, Daimler’s Car2Go and BMW’s DriveNow carshare programs — which include a total of 20,000 vehicles, 4 million customers, in 31 major international cities — will be combined, pending regulatory approval of the merger.

Other Daimler services slated to merge with BMW programs include Urban booking and payment platforms Moovel and ReachNow; Ride-hailing services mytaxi, Chauffeur Privé, Clever Taxi, and Beat; digital parking services ParkNow and Parkmobile Group; and networked public charging stations ChargeNow and Digital Charging Solutions.

In regards to how the joint venture will specifically operate, and how the platforms will co-exist or change, could not be addressed yet, a Daimler spokeswoman told AFN.

“We just signed the agreement so it’s a little too early to say,” she said.

BMW did not respond to requests for comment by press time.

Harry Campbell, of the popular blog The Rideshare Guy, agreed there will be more M&A activity with OEMs.

“I think automakers know that a discreet point in the future is that ownership is going to be changing; transportation-as-a-service from Uber and Lyft have been eating away with this and autonomy, and I think carmakers know they’re going to be a big shift but aren’t sure how to be involved in this future model,” he said.

This future is one where we have reached full autonomy and autonomous services have proliferated the market. But in the meantime, BMW and Daimler are able to gather more data and learn more about customer behavior than each company would by itself. Brulte said he anticipates that the mobility ecosystem will see more mergers and acquisition activity throughout the year, although he was unsure of what companies may be next.

“Watch where the dominoes fall, because this is just the beginning,” he said.

The formation of the joint venture will produce a significant valuation and earnings effect at Daimler Financial Services, while BMW will see a one-time valuation and earnings effect in the BMW AG’s group financial statement and thus lead to an adjustment of the company’s guidance, the press release said. Under these circumstances, pre-tax earnings on Group level would increase slightly in 2018 compared with the previous year.

The Daimler spokeswoman declined to say how much this would impact future Daimler earnings but did say that if the joint venture receives regulatory approval this year it would significantly increase Daimler Financial Services’ EBIT. However, until regulatory approval is granted, it could not be determined when exactly an impact from the joint venture would be seen.

As featured in Auto Finance News on March 28, 2018

Uber Self-Driving Program’s Fate Unclear As It Lets California Test Permit Lapse

The future of Uber’s self-driving vehicle program is increasingly murky as the company has told California it won’t be renewing a permit to test robotic cars in the state.

This news comes after Arizona suspended the rideshare company’s AV program there following a fatal collision with a pedestrian.

Uber last week announced that it was halting all testing of autonomous vehicles on public roads in Arizona, California, Pittsburgh and Toronto after the March 18 accident that killed Elaine Herzberg, 49, as she crossed a dark street in Tempe, Arizona. The California Department of Motor Vehicles sent a letter to Uber on March 27 confirming the company’s decision.

“Uber has indicated that it will not renew its current permit to test autonomous vehicles in California. By the terms of its current permit, Uber’s authority to test autonomous vehicles on California public roads will end on March 31, 2018,” Brian Soublet, chief counsel for the California DMV said in the letter to Austin Heyworth, Uber’s public affairs manager.

Should Uber at some future date want to restart testing in California, not only will it need a new permit, the company “will need to address any follow-up analysis or investigations from the recent crash in Arizona and may also require a meeting with the department,” Soublet said.

The Arizona accident is the first known fatality involving a pedestrian and an autonomous vehicle, and a black eye for the Uber program that was working to get back on track after a high-profile legal fight involving stolen trade secrets with Alphabet Inc.’s Waymo. Federal investigators and Tempe’s police department are studying the accident to determine if Uber’s self-driving Volvo XC90 SUV had malfunctioning sensors, software, computers or an entirely different flaw.

“To regain public trust Uber has to come out and explain exactly what happened in Arizona and how it’s going to fix it,” said Grayson Brulte, an autonomous tech industry consultant based in Beverly Hills.

“You really have to wonder what is the long-term roadmap for Uber’s program? Does (CEO Dara Khosrowshahi) shut this down or hit the reset button and rebuild it from the ground up? And if so, does Uber partner with a big OEM rather than do it alone?”

Uber didn’t respond to a question about whether Khosrowshahi remains fully committed to the program, but confirmed the decision not to renew its California permit at this time.

“We proactively suspended our self-driving operations, including in California, immediately following the Tempe incident,” Uber said in an emailed statement. “Given this, we decided to not reapply for a California DMV permit with the understanding that our self-driving vehicles would not operate on public roads in the immediate future.”

In the wake of the Uber accident, Nvidia said today that it too was halting public roads tests of its self-driving vehicles. The company currently has just four cars registered for the AV program, according to the California DMV. Likewise, Toyota suspended tests of its autonomous vehicles on public roads in California and Michigan last week and has not yet resumed them, said John Hanson, a company spokesman.

Waymo, which today announced an autonomous vehicle partnership with Jaguar in addition to its program with FCA to get Pacifica Hybrid minivans, has continued its U.S. testing and has General Motors’ Cruise unit. NuTonomy, the self-driving tech unit acquired by Aptiv, has just restarted testing its robot cars in the Boston area after a brief suspension.

“Testing resumed today in Boston following a review of our program and its safety protocols with city officials,” the company told Forbes in an emailed statement.

Arizona Governor Doug Ducey, who welcomed Uber’s self-driving vehicles to the state in late 2016, this week rescinded the rideshare company’s ability to test there. In a March 26 letter to CEO Khosrowshahi, Ducey said he’d directed the state’s Department of Transportation to “suspend Uber’s ability to test and operate autonomous vehicles on Arizona’s public roadways.” In addition to its fleet of more than 150 automated Volvo XC90 SUVs testing in and around Phoenix, Uber also stopped testing its self-driving semi-trucks in the state.

Uber’s Volvo test vehicle was loaded with sensors, including LiDAR and radar that can see pedestrians and objects in dark or in light. And even if the LiDAR, which shoots out pulsed laser beams to create 3D, 360-degree images of a vehicle’s surroundings, failed, the radar should have detected the metal bicycle that Herzberg was pushing.

For now, it’s hard to assess the broader impact of the crash on other developers of autonomous technology, Karl Iagnemma, nuTonomy’s CEO, said Tuesday at the NADA 2018 Global Automotive Forum in New York.

“It does shine some light on some of these questions about the uniformity of practices,” he said, such as how many human safety drivers are in the test vehicles and there use of redundant sensors and other equipment. For its part, nuTonomy takes a “real belt and suspenders approach to safety,” in terms of backup systems and heavy use of simulated testing, Iagnemma said.

The real risk is the threat “the public comes out of this with a partially formed view of autonomy,” he said.

As featured in Forbes on March 27, 2018