The second half of 2022 turned out to be a mixed bag for the automated driving sector. The capital that was so free flowing from the mid-2010s onward has largely dried up and the long-expected consolidation in the sector seems to have begun. One of the leaders in the segment surprised the industry when it announced that it was shutting down and others have reduced their operations.
For the last decade, investors around the world have willingly thrown mountains of cash at AV startups which produce no revenue and show little prospect of near-term profits. Suddenly those investors have turned off the taps. As a result, dozens of companies including Aurora Innovation, TuSimple, and Luminar, all of which went public prematurely in 2020 and 2021, have seen their valuations collapse by 80-90% or more in the past year.
Meanwhile, others like Mobileye and Argo AI waited longer and missed the window of opportunity to cash in, as the overall stock market has declined with rising interest rates. Both companies had plans to go public in 2022 but only Mobileye did — and only at a fraction of the originally expected valuation. When Intel announced plans for a Mobileye public offering in December 2021, it was targeting a valuation of $50 billion to help raise funds for new chip foundries. By the time of the IPO in October 2022, the valuation was about $16 billion, barely more than Intel paid for Mobileye in 2017.
Unlike virtually all companies in the automated-driving sector, Mobileye was at least profitable thanks to its driver assistance business where it is still the dominant player in vision systems.Argo AI which was 80% owned by Ford and Volkswagen, didn’t make it that far. The Pittsburgh-based startup was just beginning to pilot public robotaxi services in Miami, Florida and Austin, Texas. It needed to raise significant capital to scale its operations as it approached commercialization. Ford had already decided that a profitable robotaxi and delivery business was too far down the road amid the need to invest $50 billion in vehicle electrification in the near term. Volkswagen decided that China, where Argo had no presence, was a better opportunity and formed a joint venture there with Horizon Robotics.
With extremely limited revenue, the prospects for a 2022 IPO were extremely poor. Argo instead hunted for new private investors. Bloomberg reported that a potential deal for Amazon to invest in Argo collapsed when Ford and VW couldn’t reach an agreement on governance of the company with Amazon involved. Rather than go forward, the decision was made to shutter Argo instead.
While other AV companies like Nuro are cutting staff to save money, the news isn’t all bad. Cruise launched driverless robotaxi services in San Francisco in June 2022 and by December was running more than 100 driverless vehicles concurrently by the end of the year. The GM-backed company announced plans to add driverless public service in Austin and Phoenix, Arizona, by the end of 2022. It plans to add operations in more cities in 2023.
Waymo is also conducting driverless tests in San Francisco and announced plans to do the same in Los Angeles. Motional is cutting some staff but announced plans to add robotaxi services in Los Angeles as part of a multi-city driverless service launch in 2023.
Going forward we’ll likely see a smaller but hopefully more stable AV sector as it slowly gains traction through the remainder of the decade.Continue reading »