Focus: Investors go back to basics with simpler self-driving vehicles

Mcf Energy

01/02/2023 06:00

By Nick Carey and Paul Lienert
       COVENTRY, England, Feb 1 (Reuters) - Developing fully
autonomous vehicles (AVs) that can go everywhere has proven
harder and more expensive than expected, but investors are
continuing to fund startups that target simpler self-driving
vehicle solutions far removed from pedestrians and other
vehicles operated by unpredictable humans.
    British AV software company Oxbotica, Sweden's Einride,
America's Outrider and British supplier Aurrigo International
Plc  AURR.L  are among a number of companies drawing investor
interest with more focused approaches, aimed at smaller, simpler
customer segments - from mining vehicles to tractors or
forklifts.
    After watching robotaxi firms spend billions on technology
that could still be many years away, investors are looking for
startups that burn less cash and are preferably already
generating revenue, said Kasper Sage, managing partner at BMW's
 BMWG.DE  venture capital fund BMW iVentures, which led
autonomous forklift company Fox Robotics' $20 million funding
round in October.
    "Full autonomy in every kind of environment is still years,
if not decades out," Sage said. "You need to have a business
case that works and you need to make the problem smaller."
    Earlier promises made by robotaxi companies of operating
fleets of vehicles by the early 2020s have fallen well short.
When Ford Motor Co  F.N  and Volkswagen AG  VOWG_p.DE  pulled
the plug on self-driving unit Argo AI in November, Ford CEO Jim
Farley said a profitable robotaxi business was still many years
away. Ford rival General Motors Co  GM.N  burned through nearly
$2 billion last year at its robotaxi unit Cruise and said it
anticipates spending even more in 2023.
    The problem is that making robot cars that can drive more
safely than people is immensely tough. This is because AV
systems still lack humans' ability to predict and assess risk
quickly, especially when encountering unexpected incidents.  
    When it became clear that the era of robotaxis was still
distant, investors in 2021 shifted instead to self-driving truck
companies that promised a faster route to market by hauling
freight autonomously - arguing it would be easier to develop AVs
to operate on highways at high speed without pedestrians.     
    But those startups have also struggled to deliver because a
robot driving fast still cannot match the human brain.  
    AV truck technology firm Aurora  AUR.O , for instance, has a
market value of $2 billion, a fraction of the $12.5 billion when
it went public in 2021 via a special-purpose acquisition company
(SPAC). 
    KEEPING IT SIMPLE 
    Faced with the long-term conundrum that people and robots do
not mix well, investors have gone back to basics, targeting
less-complex, less cash-intensive forms of autonomy with a
clearer path to payback, operating at lower speeds with little
to no traffic.
    BMW iVentures has also invested in AV truck technology firm
Kodiak Robotics, which managing partner Sage said has adopted a
simpler approach to areas like mapping.
    In October, Kodiak won a $50 million contract to develop AVs
for the U.S. Army.
    "It helps that we're not spending a ton of money, like some
folks have," said Kodiak CEO Don Burnette. 
    Overall venture investment in AV companies in the fourth
quarter plunged 47% to $1.4 billion from a year earlier,
according to PitchBook senior analyst Jonathan Geurkink.
    But $500 million of that went to AV electric truck firm
Einride, which is working towards running self-driving trucks on
public roads but has focused first on less-crowded private roads
at logistics and manufacturing hubs of customers like GE
Appliances, a unit of Chinese home appliance maker Haier
 600690.SS . 
    "The shift in investment ... toward off-road/more structured
environments is a very real one given the lack of progress in
passenger AVs (and) the high capital requirements involved,"
said Asad Hussain, research partner at private equity firm
Mobility Impact Partners.
    'SOMEWHERE, NOT EVERYWHERE'
    Last month, British AV software startup Oxbotica announced
$140 million in funding to roll out more products, starting with
AVs operating in mines and remote areas. 
    "We're really focused on 'somewhere' autonomy rather than
'everywhere' autonomy because that's where the value is today,"
Oxbotica CEO Gavin Jackson said. 
    Jamie Vollbracht, founding partner of Kiko Ventures, IP
Group Plc's  IPO.L  $450 million clean-tech investment platform,
said mining companies can lose millions of dollars per hour in
remote areas if they cannot get a human driver into a truck,
placing them among a growing number of viable markets for AVs.
Kiko was Oxbotica's first institutional investor.  
    "There has been a major underestimation of the scale of
those early (AV) applications," Vollbracht said.
    U.S. startup Outrider in January announced $73 million in
funding to scale up its self-driving trucks that currently
operate at low speeds in customers' distribution yards. 
    Construction and agricultural equipment - used off-road in
low-traffic environments - has been another growth area for AV
startups. They are operating alongside traditional heavy
equipment makers like Caterpillar Inc  CAT.N , Deere & Co  DE.N 
and CNH Industrial NV  CNHI.MI , which have also invested in AV
technology.
    Like Oxbotica, Apex.AI designs AV software for use in a
variety of vehicles for "a number of non-automotive and trucking
customers (with) a wide range of applications," said CEO Jan
Becker.    
    U.S. agricultural equipment maker AGCO Corp  AGCO.N , for
instance, is using the Palo Alto, California-based startup's
software for an experimental automated electric planter.
    Deere has already acquired a number of AV-related businesses
as it moves towards autonomy, including self-driving tractor
firm Bear Flag Robotics for $250 million in 2021.
    San Francisco-based Trucks Venture Capital had invested in
Bear Flag before its sale and managing partner Reilly Brennan
said the firm is "actively looking for another autonomous ag
(startup)."
    Trucks Venture Capital has also invested in Teleo, a maker
of semi-autonomous retrofits for heavy construction and mining
equipment that announced $12 million in funding last June.
    Teleo's system allows a human operator to control multiple
slow-moving AVs remotely and to take over only in situations
that the software cannot handle. CEO Vinay Shet said combining
the best of AV software and the human brain allowed Teleo to
"build a real product that we can take to market today and not
wait for another decade or two." 
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 (Reporting By Nick Carey in Coventry, England, and Paul Lienert
in Detroit, Editing by Ben Klayman and Matthew Lewis)
 ((nick.carey@thomsonreuters.com; +44 7385 414 954;))