quick take: “ok, google, call me a cab”— profiling waymo ... · commercialize its autonomous...

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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

March21,2017

Inthisreport,welookatWaymo―previouslyoperatingunderAlphabet,Google’sparentcompany―acompanyleadingthepackinself-drivingtechnology.Wealsoexploretheopportunitiesintheautonomousvehiclemarket.

1) InDecember2016,AlphabetannouncedthattheGoogleself-drivingcarprojectithadbeenworkingonwouldbespunoffintoanindependententitycalledWaymo.

2) Bytheendof2016,Waymohadcompleted637,868milesofautonomousdrivingonUSpublicroads,which,accordingtothecompany,hasimproveditssoftwareconsiderablyandgivenitaleadoveritscompetitors.

3) Waymohasdevelopeditsproprietaryself-drivingsystementirelyin-house,andintheprocess,managedtocutthecostofthelidarsensors(rangingtechnologythatuseslaserlight)itusesbynearly90%.

4) Waymosaysthatitisactivelyseekingsupplierstocommercializeitsautonomousdrivingtechnology,inthehopesofdevelopingandlaunchingafullyautonomouscarby2020.

Quick Take: “OK, Google,

Call Me a Cab”—Profiling Waymo,

the New Leader in Autonomous Driving

Deborah Weinswig

Managing Director,

Fung Global Retail & Technology

[email protected]

US: 917.655.6790

HK: 852.6119.1779

CN: 86.186.1420.3016

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March21,2017

Waymo—TheNewLeaderinAutonomousDrivingThedaywhen“Ok,Google,callmeacab”ismetwiththeInternetgiant’sself-drivingcarstransportingthecallerisnottoofaraway.Google’sparentcompanyAlphabethasbeenworkingondevelopingvehiclesthatcandriveautonomously,i.e.,withoutahumandriver,since2009.

Initially,theprojectwascalled“theGoogleself-drivingcarproject”andtheinitialtestsweredoneusingmodifiedToyotaPriusvehiclesthatdrovearoundAlphabet’sheadquartersinMountainView,California.Eightyearsandover2millionmilesofself-drivingtestslater,theGoogleprojecthascomeintoitsown.

InDecember2016,Alphabetrevealedthatitwasspinningofftheprojectintoanindependententityunderitsumbrella,calledWaymo,which,untilthen,hadbeenpartofthefirm’scloselyguardedresearchunit,GoogleX.

Waymocreatesself-drivingsystemsthatcanbefittedtocars,allowingthemtodriveautonomously.Increatingastand-alonecompany,Alphabetiscommittedtocommercializetheprojectandproduceandlaunchafullyautonomouscarby2020.Itismovingfastandmovingsmart,andthishasevokedstrongreactionfromtheindustry.

ConnectedCarsVersusAutonomousCars Webeginbyironingoutsomedefinitions.Itisimportanttodistinguishbetweenconnectedcars,whichhavebeeninthemarketforafewyearsnow,andautonomousorself-drivingcars.

Connectedcars:Thesearevehiclesthatcancommunicatewitheachotherandwiththosearoundthem,usingmobiletechnologyandtheInternet.Connectedcarsstillneedtobeoperatedbyahumandriver.

Autonomouscars:Aself-drivingorautonomouscarisonethatcannavigateonitsown,withoutthepresenceorsupervisionofahumandriver.Itusessensors,camerasandartificialintelligence(AI)togaugeitssurroundingsanddrivesmoothly.

Anautonomouscardoesnotrequireconnectedtechnologybebuiltintoit―itshouldbeabletofunctionindependentlyofhumancontroloranexternalmachine.However,bothvehicletypesstandtobenefitfromincorporatingelementsofeachofthesetechnologies.

Connectedtechnologyhelpsautonomousvehiclestoreceivereal-timeupdatesontrafficandnewdevelopmentsonroads,allowingforsafeandefficientnavigation.

Autonomoustechnology,suchassensorsandcamerasplacedontheexteriorofconventionalandconnectedcars,allowsdriverstoparkeasilyandnotifiesthemwhenpeopleorobjectsaretooclose.

Aself-drivingorautonomouscarisonethatcannavigateonitsown,withoutthepresenceorthesupervisionofahumandriver.

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March21,2017

WhyWaymoisLeadingtheRaceinAutonomousCarsApartfrombeingrearedatAlphabet’sstables,givingitcompleteaccesstothefirm’ssophisticatedtechnology,profoundexpertiseandcommercialclout,therearefourotherfactorsworthnotingthatmakeWaymounique:1)itsstate-of-the-artself-drivingtechnology;2)thenumberofautonomouslydrivenmilesithas,exceedingthecompetitioncombined;3)theself-drivingtechnologywascreatedentirelyin-house,andWaymohasmanagedtocuthardwarecostsconsiderably;and4)thecompanyaimstoexpandapplicationofitstechnologytootherservicesandsectors.

Source:waymo.com

1. State-of-the-ArtSelf-DrivingTechnologyThecutting-edgetechnologyWaymouseshasraisedthebarforallcontendersintheracetobuildthebestautonomouscar.Apartfromninecamerasplacedaroundthecar,Waymo’ssystemcontainssensorsthatworkusingradarandlidartechnologies.

Radarusesradiowavesandlidaruseslaserlighttodetectobjectsaroundthesensorsandmeasurethedistancebetweenthem.Thesecamerasandsensorsconstantlygatherdata,whichisprocessedbythesystem’ssoftwareandallowsthecartonavigatethroughtrafficindependently.

Thecompetitioncannotyetclaimthattheirtechnologyenablesfullyautonomousdriving.Carsthatusetheself-drivingsystemsmadebycompetitorsMobileyeorDelphi,suchasTesla’svehicles,facilitateautomaticdriving,butunderhumansupervision.

Previously,Waymo’stestcarsreliedmainlyonmedium-rangelidarthatallowedthevehicletodetectpeopleandobjectsonlywithinalimitedradius;thiswastheonlykindoflidarthatexisted.Recently,thecompanycreatedtwonewcategoriesoflidartechnology:1)shortrange,whichgives“thecaracompletelyuninterruptedsurroundview—under,infront,behindandnexttothevehicle’sbody—so(it)cansafelyseesmallpeopleandobjects,nomatterhowclosetheyaretothecar;”and2)longrange,whichallowsthecartodetecteven“afootballhelmettwofullfootballfieldsaway.”

Waymo’ssystemcontainssensorsthatworkonradarandlidarthatallowthecartonavigatethroughtrafficindependently.

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March21,2017

2. MoreAutonomouslyDrivenMilesUnderitsBeltthantheCompetitionCombined

WaymohasconductedextensiveresearchbytestingitscarsonpublicroadsintheUS,whichhasbeendocumentedbytheAutonomousVehicleDisengagementReportsreleasedbytheStateofCaliforniaDepartmentofMotorVehicles.

Sinceitsinceptionin2009,Waymo’svehicleshaverecordedover2millionmilesofautonomousdriving,ofwhich,637,868wererecordedonpublicroadsintheUSbetweenDecember2015andNovember2016.Thisissignificantlyhigherthanthecombined20,312autonomouslydrivenmilesonUSpublicroadsrecordedbythecompetition’scarsduringthesametimeperiod.

Figure1.US:MilesRunbyAutonomousVehiclesonPublicRoadsin2016

Source:“AutonomousVehicleDisengagementReports,”StateofCaliforniaDepartmentofMotorVehicles

Source:waymo.com

635,867.9

20,311.7 Waymo

GM

Nissan

Delphi

Bosch

Mercedes-Benz

BMW

Ford

Tesla

BetweenDecember2015andNovember2016,Waymo’svehiclesrecorded637,868milesofautonomousdrivingonUSpublicroads,whileitscompetitorsrecordedatotalof20,312milesduringthesametime.

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March21,2017

Allofthisautonomousdrivinghaspaidoff.Waymo’ssoftwarehasimprovedsubstantiallysince2015.Onemeasureusedtocheckthesoftware’scapabilityisthedisengagementrate:thisisthenumberoftimestestdriversneedtotakeoverwhensoftwarefailsorforsafetyreasons.

In2015,Waymo’stestdrivershadtodisengage0.8timesforevery1,000milesdrivenbyitsvehiclesonpublicroadsinCalifornia.In2016,thisratedroppedto0.2timesper1,000milesdriven,whichismuchlessthantheraterecordedbyitscompetitors,implyingagreaterdegreeofsophisticationinitstechnology.

3. ItsSelf-DrivingTechnologywasDevelopedEntirelyIn-House,AllowingWaymotoCutHardwareCostsConsiderably

Waymodevelopeditsstate-of-the-artself-drivingsystementirelyin-house,whichhashelpedinloweringthecostoflidartechnologyandgiventhecompanyanalmostmonopolisticedgeoveritscompetitors,evenifitisonlytemporary.Asinglehigh-endlidarsensorusedtocost$75,000,accordingtoWaymo,butithassincemanagedtoslashthisby90%.

InDecember2016,whenWaymo’sCEO,JohnKrafcik,wasspinningoffthefirmfromwithin,hestatedthatWaymowasactivelylookingforsupplierstoworkwithandwashopingtobringcostsdownfurtherinadrivetocommercializethesystem.

With:1)aproprietaryself-drivingsystemthatincludesbreakthroughtechnologyandsoftware;2)aproventrackrecordforsafetyandmileage;and3)successfullymanagingtosignificantlydecreasecosts,webelievecarmanufacturersaregoingtoseekWaymo’sofferingoverthecompetition,untilcompetingfirmsareabletodevelopasimilarlysophisticatedyetaffordablesystemthatenablescompleteautonomyindriving.

4. PlanstoExpandtheApplicationofitsTechnologytoOtherServicesandSectors

Waymohasmentionedittargetstoexpanditstechnologybeyondpersonaluseandapplyittootherservicesandsectorssuchasridesharingandlogistics.

Waymohascreatedapassenger-onlyprototypeforacab,whichdoesnothavepedalsorasteeringwheel.InOctober2015,thecompanyannouncedthatithadsuccessfullytestedthecarinTexas,withablindpassengerridinginitsolo,andadvocatestheuseofitstechnologytohelpdisabledpassengerstravelindependently.

AlthoughWaymohasyettoopenlytrialitstechnologyforuseintaxis,GoogleInc.,thecompanythatwasresponsiblefortheproject(andwhosenamehassincebeenchangedtoAlphabet),filedapatentonJune22,2015,intheUS,titled“DeterminingPickupandDestinationLocationsforAutonomousVehicles,”whichsuggestsplansforataxiservice.Figure2exhibitsthedrawingsexcerptedfromthecompany’spatentnumber20160370194,whichwasrecentlymadepublic.

Waymodevelopedandproduceditsself-drivingtechnologyentirelyin-houseandhasmanagedtocutthecostoflidarsensorsbyatleast90%.

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March21,2017

Figure2.ExcerptsFromGoogleInc.'sPatentFilingTitled“DeterminingPickupandDestinationLocationsforAutonomousVehicles”

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March21,2017

Source:USPTO.gov

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March21,2017

Waymoisnotaloneintrialingtechnologyfortaxiservices.Uberhasalreadytestedself-drivingcabswithanengineerpresent,inPittsburgh,andMIT-spinoffnuTonomyhasrunapilotwithautonomouscabsinSingapore.Althoughthesetwofirmshavealegupinthecab-hailingsector,bothappeartobefarfromachievingthelevelofsophisticationthatWaymohasreachedinautonomous-drivingtechnology.

However,recentnewssuggeststhattheracefortheleadershipinself-drivingtechnologyisabouttoheatup.WaymofiledalawsuitagainstUberearlierinFebruary2017,claimingthatthetaxicompanyhadstolenitstradesecretsandinfringeditspatents.Uber’sautonomous-drivingtechunit,Otto,wasfoundedbyAnthonyLevandowski,aformerengineerwhoworkedontheGoogleself-drivingcarproject.

WaymoclaimsthatLevandowskiunlawfullydownloadeddatawhilehewasemployedatAlphabetandthatitlearntoftheinfringementwhenasuppliertobothfirmsinadvertentlysentanemailtoWaymothatwasintendedforUber.

Althoughtheoutcomeofthelawsuitremainstobeseen,Waymoappearstobetheclearleadercurrently,intermsofprogressinself-drivingtechnology.

BarrierstoImmediateCommercializationDespiteitstechnologicaladvancements,therearetwokeyfactorsholdingWaymobackfromcommercialization:roadtransportregulationsandhighcosts.Safetyisanotherconsideration.

Roadtransportregulations:VeryfewstatesintheUSallowself-drivingcars,andwheretheydo,thelawsthatgovernthemarequitestrict.Thissignificantlyimpactsconductingtestsinvariedenvironments.Waymohastesteditstechnologyinotherstates,whereallowed,andinvaryingweatherconditions,however,thisstilldoesnotmakeitapplicableinalltypesoftrafficsituationsacrosstheglobe.

Costs:Asweoutlinedearlier,thetechnologyisstillratherexpensiveandWaymoneedstoidentifysuitablesupplierstopartnerwithandbringdownmanufacturingcostsfurther.Carbuyerswillhavetopayforthepriceofthecarplusthecostofthesystem,andmayviewtheadditionalcostasundesirableuntilWaymoisabletoachieveeconomiesofscaleinmanufacturing.

Safety:Anotherfactorthatislikelytodiscourageconsumersfromadoptingthistechnologyisthesafetyofautonomousvehicles.Although,accordingtoWaymo,vehiclesthatrunitstechnologyrequiredrelativelylittlehumaninterference,75%ofUSconsumerssaidthattheyarenotyetreadytoacceptself-drivingcars,accordingtoaMarch2016pollconductedbytheAmericanAutomobileAssociation.

Some75%ofUSconsumerssaidtheyarenotreadytoacceptself-drivingcars,inaMarch2016poll.

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March21,2017

WhatWeThinkWaymoisfaraheadofitscompetitorsintermsofresearchanddevelopment.Withtheprogressithasachievedintermsofitstechnologyandextensiveroadtests,weseelittlethatisholdingitbackfromattainingtheleadingpositioninanas-yetundevelopedmarket.

Thecompanywillonlyrealizetruemarketleadershipwhenitcancommercializeitstechnology,butfirstitmustovercomethenear-termregulatoryandcosthurdles.Withalargenumberofconsumersstillwaryofself-drivingtechnology,mishaps,suchasTesla’scarsrunningintoaccidentswhentheyareinAutopilotmode,dolittletohelpthemoraleandattitudetowardthetechnology.

Waymosaidthatitaimstoreleaseafullydriverlessvehiclefortheconsumermarketby2020.Keepinginminditsveryvocalassertionofitsplanstopartnerwithspecialistsuppliers,combinedwiththeprogressithasmadetodate,comparedtoothercompanies,indevelopingsafeautonomousvehicles,Waymo’sgoalofproducingacompletelyautonomousconsumercarlooksveryachievable.

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March21,2017

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalystSwaroopraniMuralidharResearchAssistantHongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com

quick take: “ok, google, call me a cab”— profiling waymo ... · commercialize its autonomous...

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