Automated Vehicle Summit: The Software vs. The Hardware Battle
Between 2016 and 2017, about half of the merger and acquisition deals in the automotive market were related to electrification or autonomy. Autonomy is real, it’s digital, and it’s coming fast.
This is one of the key takeaways from last week’s Autonomous Vehicle Summit (AVS) held in San Francisco, CA. The four-day event covered topics on regulatory policy and technology advancement. The summit not only focused on the Silicon Valley but also opened up conversations spanning the globe. Attendees were able to hear about the mobility strategy in the UK, Dubai’s self-driving transport vision, and the research being done by the US Department of Transportation.
Hemi Ventures was invited to join Thursday’s venture capital panel along with other experienced investors in the ecosystem from Toyota AI Ventures, BMW i Ventures, Maniv Mobility, and Motus Ventures. R&D investment is not slowing down with over $61 billion predicted to be spent globally in driverless technologies.
When asked how to assess the probability of success when scalability is years down the road, Amy Gu, Hemi managing partner, answered, “Our investment thesis is not centered on whether a portfolio company will achieve Level 4 or Level 5 technology. This becomes hard to quantify and evaluate.” As an example, she explained, “We look at the specific AV use case. For self-driving trucks, we look at number-driven metrics such as how much money can management fleets save or how much more can truck drivers earn.”
Both corporate and institutional investors have realized the importance of different use cases and business models emerging in the AV ecosystem. Mobility is no longer centered around traditional auto-making. The statistics clearly show this, as the US auto market is expected to fall to 16.8 million unit sales in 2018, down from 17.2 million in 2017 and full battery electric vehicles will take 20% of the US market share by 2030. As car ownership declines and car ridership increases, OEMs are setting up partnerships to join the conversation as mobility players rather than just auto manufacturers.
Along with mobility innovation, AVS panelists also talked about the digitization shift that’s happening and how companies can get ready for this. More specifically, the industry is working on the marriage between the evolving software models and the existing hardware components of a driverless vehicle. Gu, an experienced software executive familiar with product cycles, stated, “The auto industry needs to learn from software companies how to accelerate iterative development.” Today’s strategy for OEMs, tech companies, and startups should be to reduce size, integrate better, and redesign faster.
Whether or not you agree with this viewpoint, hardware, software, and integration of the two are critical factors needed to advance AV commercialization. Hemi’s portfolio companies are working laboriously across the spectrum to make this happen with self-driving truck programming (Starsky Robotics and PlusAI), GPS precision services (PointOne), self-driving car middleware systems (Polysync), and remote driver services (Scotty Labs). These companies continue making significant strides to help autonomous vehicles become an $800 billion market by 2035 as predicted.
