- The gap between the self-driving industry’s leaders and their competitors is growing.
- The top tier includes Waymo, Cruise, Argo AI, Aurora, and Motional.
- Newcomers have the best chance to succeed if they target opportunities outside of ride-hailing.
- See more stories on Insider’s business page.
In the decade after Google started working on self-driving cars, in 2009, a wave of startups, automakers, and tech companies decided to challenge the search-engine giant.
The denizens of the new industry, including the investors who fueled it, were optimistic. Venture capitalists and fund managers poured tens of billions of dollars into companies working on automated-driving technology, while Cruise and Tesla said customers would be able to ride in their self-driving vehicles by 2020. Cruise backed off its end of 2019 deadline in July of that year. Tesla has repeatedly pushed back its timeline for its “Full Self-Driving” feature.
Indeed, progress has been slower than expected. Only two companies, Waymo and Motional, are operating robotaxis that are available to the public, and those vehicles are confined to small portions of two states (Arizona and Nevada, respectively). Though driver-assistance systems are becoming more capable, consumer vehicles that can drive anywhere without human supervision are unlikely to arrive until the 2030s at the earliest.
The long, grueling road to making automated-driving systems capable of handling the seemingly endless variety of low-probability situations they must be able to handle has tested the fundraising abilities of autonomous-vehicle startups and the patience of their benefactors.
And that road has taken its toll. Many companies shut down, or had their employees hired en masse by a bigger competitor, Dan Ratliff, a principal at the venture-capital firm Fontinalis Partners, told Insider. A wave of consolidation has followed, as the strongest players have bought weaker competitors or sold themselves to deep-pocketed buyers. According to Pitchbook, there were a total of 33 mergers and acquisitions involving autonomous-vehicle companies in 2019 and 2020, compared to 22 such deals between 2017 and 2018.
Some contenders have given up after spending hundreds of millions of dollars but making little visible progress. Four years after former Uber CEO Travis Kalanick said the ride-hailing firm would face an existential threat if it didn’t become the leader in automated-driving technology, his successor gave the company’s autonomous-vehicle unit — and $400 million — to Aurora Innovation in exchange for equity. Lyft followed four months later, offloading its self-driving unit to Toyota.
The top players are growing their lead
The shakeup has left the industry with a group of leaders that will be difficult to unseat, industry observers say. The gap between those top companies and their competitors is widening, Boston Consulting Group automotive analyst Brian Collie told Insider.
“It’s very, very difficult for a number of those folks to keep up,” he said.
Waymo has emerged as the consensus number-one. It’s the only company that has launched an autonomous ride-hailing service (Motional runs its vehicles on Lyft’s network in Las Vegas), and while that service is small at the moment, Waymo has hinted at plans to expand it. The company has also signed deals with big-name partners in the automotive, trucking, and logistics industries, and its first outside funding round was the largest any autonomous-vehicle firm has raised.
Experts typically rank a similar handful of companies just below Waymo, including Cruise, Argo AI, Aurora, and Motional. Each has raised more than $1 billion while convincing some of the world’s largest automakers to work with them, and all but Aurora have announced plans to launch ride-hailing or delivery services by the end of 2023. (Aurora has said it intends to have its vehicles ready for use in commercial ride-hailing services “over the next few years.”)
Any newcomer that tried to compete with that group,which has pursued ambitious, diverse business models that attack the most challenging applications of automated-driving technology, would be in trouble, Ratliff said.
“If you wanted to go and start a robotaxi business today, I think you’d have a lot of trouble attracting capital,” Ratlif said.
The best opportunities for startups lie outside ride-hailing
But there are still opportunities for new companies to break into the autonomous-vehicle industry. The key, Ratliff said, is to target applications — mining, dock yards, or airports, for example — that have not received much attention from giants like Waymo and Cruise. Entrepreneurs seem to have the same idea. Reilly Brennan, a general partner at the venture-capital firm Trucks, wrote in a May newsletter that new autonomous-vehicle startups are looking beyond ride-hailing.
“I don’t think we’ve seen a new, pure, unstructured robotaxi startup at Trucks since late 2017; it’s been all about highly structured AV business models (agriculture: Bear Flag Robotics, middle mile logistics: Gatik, urban routes: May, etc.) since that time,” Brennan wrote.
Ouster, a company that makes lidar sensors, a key piece of hardware for self-driving vehicles, is building its business around the idea that automated-driving technology will make an impact far beyond consumer vehicles and ride-hailing. Ouster CEO Angus Pacala told Insider the company has more than 500 customers that will use its sensors in more than 100 different applications.
“The whole bet that Ouster is making is that autonomy is a general trend across industries,” Pacala said.
Nuro has illustrated the enthusiasm that autonomous-vehicle startups can generate by moving goods instead of people. The startup, founded by two early members of Google’s autonomous-vehicle program, is building self-driving delivery vehicles that businesses could theoretically use as a lower-cost alternative to services that rely on human drivers, like DoorDash and
The startup says autonomous delivery is an easier technological problem to solve than robotaxis or consumer vehicles, and its investors agree. In recent years, Nuro has begun to build a list of Fortune 500 customers while becoming one of the most successful fundraisers in the self-driving industry.
“You look at the thing they’re building, and it’s not the same as anybody else’s,” Nuro board member John Lilly told Insider.
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