Focus: Nimble tech firms must adapt as promised self-driving revolution hits speed bumps (updated)

Navya SA

23/09/2019 14:27

(Adds detail about Argo AI in paragraph 19)
    By Alexandria Sage
    SAN FRANCISCO, Sept 23 (Reuters) - When Silicon Valley
startup Phantom Auto was formed in 2017, it was one of many
software suppliers hitching their fortunes to self-driving cars,
confident that fleets of robotaxis would be using their
technology within a few years.
    But with delays in the mass deployment of autonomous
vehicles, Phantom is now finding new customers off the road - on
the sidewalk with delivery robots.
    Phantom is not alone. Faced with the harsh reality that an
autonomous future is further away than originally promised by
global automakers and tech companies like General Motors Co
 GM.N , Uber Technologies Inc  UBER.N  and many others, smaller
companies in the self-driving ecosystem are now pivoting to
alternate uses for their technology. Some are turning to
delivery robots, while others are helping deploy autonomous
vehicles for farms, construction sites or airports.
    Robotaxis are still considered the industry's "humongous
opportunity," in the words of Phantom co-founder Elliot Katz,
but shifting to creative new ways to deploy the auxiliary
technologies allows for immediate revenue during the long slog
before autonomous vehicles hit the roads en masse. 
    The widescale deployment of robotaxis, once pegged by
industry analysts to be a $2 trillion industry by 2030, is now
seen as further away due to a variety of hurdles, among them
cost, complexity and unresolved legal and regulatory concerns. 
Meanwhile, more modest rollouts of self-driving vehicles are
coming sooner in limited areas with defined borders. 
    The shift in expectations is driving players large and small
to rethink strategies and re-evaluate financial risk. On Monday,
automotive technology supplier Aptiv PLC  APTV.N  said it has
agreed to puts its self-driving vehicle unit in to a joint
venture with South Korean automaker Hyundai Motor Co 005380.KS .
Hyundai will contribute $2 billion to the venture. Rival
automakers Ford Motor Co  F.N  and Volkswagen AG  VOWG_p.DE  in
July agreed to combine autonomous vehicle operations.
 urn:newsml:reuters.com:*:nL3N26E1SR urn:newsml:reuters.com:*:nL8N24D385
    In Phantom's case, its remote operations technology, which
allows a human operator miles away from an autonomous car to
take over control when the car is confused, can be used for less
safety-critical tasks.
    Postmates, a San Francisco-based goods delivery company,
will use Phantom's technology inside fleets of over a hundred
sidewalk robots as they navigate sidewalks and crosswalks to
deliver lunches, snacks, or other goods to customers, beginning
next year. 
    "We had to figure out where is autonomous technology
deployable today," Katz told Reuters. "It's about handpicking
the right opportunity for the immediate term, medium term and
long term."
    Egil Juliussen, research director for automotive technology
at IHS Markit, said that using the same technology for
non-automotive applications, like robots, is a simpler path to
market that can still tap the startups' artificial intelligence
technology. 
    French autonomous shuttle maker and operator Navya SA
 NAVYA.PA  threw out its financial targets in July and unveiled
a new strategy of selling its technology to others. 
    The catalyst was the continued uncertainty over regulation
that jeopardized anticipated fleet orders by customers last
year, Chief Operating Officer Jerome Rigaud told Reuters. That
led to missed 2018 revenue projections and the removal of
Navya's founder and CEO. 
    Navya still plans to test its self-driving shuttles without
a safety driver by early next year, but it now sees new
opportunities in areas where regulation is simpler: hauling
goods at airports, industrial sites and construction areas at
slow speeds in limited areas, and in agriculture, Rigaud said. 
    
    MORE MONEY, PLEASE
    Evangelos Simoudis, managing director of Silicon Valley
venture capital firm Synapse Partners, which invests in
autonomous technology startups, said VCs recognize that full
self-driving will take much more money, as well as time, to
recoup the 10x return on their investments of $5 million to $50
million - amounts that are typical in the sector. 
    In the interim, smaller companies are on the line.
    "If they have flexibility they may pivot and go to something
adjacent or radical in order to survive, but nonetheless there
will be a period of significant change," Simoudis said. "There
will be quite a high mortality rate."
    The sweet spot for companies searching for alternative ways
to use self-driving technology is software related to
simulation, data annotation and data management, Simoudis said. 
    Companies making software are better positioned to pivot
than those doing hardware, experts agree. There has already been
some consolidation in the crowded field of lidar, a key hardware
component using laser light pulses to help vehicles "see," after
some companies have struggled to raise new funds.  urn:newsml:reuters.com:*:nL1N20F1LA
Digital mapping is another area ripe for consolidation, Simoudis
said.
    Automakers and others have snatched up these startups in
recent years, including Strobe Lidar and Princeton Lightwave,
which were acquired in 2017 by General Motors and Argo AI,
respectively. Argo AI is majority-owned by Ford and VW. Earlier
this year, self-driving startup Aurora bought Blackmore Lidar.
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    Last month, food delivery company DoorDash bought startup
Scotty Labs, a competitor to Phantom also involved in the remote
control of autonomous vehicles. The loss of Scotty's main
customer, Voyage - which operates small fleets of self-driving
vehicles in closed residential communities - and difficulties in
raising funds led to its sale, two sources told Reuters. 
    Executives at Ouster, a startup whose lidar technology is
also found inside Postmates' robots, said it was a conscious
decision from the start to avoid focusing exclusively on
automotive lidar.
    Instead of diversifying, too many companies have focused on
the "pot of gold at the end of the rainbow," said Raffi
Mardirosian, Ouster's vice president of corporate development,
making them vulnerable to setbacks in the broad deployment of
autonomous vehicles.
    "If you're in these investor meetings like I am, they're
saying 'Show me the contracts. Show me the monthly revenue,'"
said Mardirosian. "The fact that we can point to that is
something that will help us stay in business."

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Self-driving startup Aurora to buy lidar company Blackmore   
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FOCUS-A chaotic market for one sensor stalls self-driving cars  
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 (Reporting by Alexandria Sage in San Francisco
Editing by Matthew Lewis and Chizu Nomiyama)
 ((alexandria.sage@thomsonreuters.com
Reuters Messaging:
alexandria.sage@thomsonreuters.com@reuters.net))