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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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
March21,2017
Figure2.ExcerptsFromGoogleInc.'sPatentFilingTitled“DeterminingPickupandDestinationLocationsforAutonomousVehicles”
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
March21,2017
Source:USPTO.gov
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected] :917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
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