Ten years has passed since Israeli advanced driving assistance systems (ADAS) company Mobileye Global Inc's. (Nasdaq: MBLY) first IPO, which put Israeli auto-tech on the map. But in recent years the auto-tech sector, and Mobileye in particular, have been on a rollercoaster with many ups and downs.
In 2017 Intel paid over $15.3 billion to buy Mobileye, which paved the way for dozens of Israeli auto-tech startups to raise large sums. But then the global car industry changed its priorities and the transition to autonomous cars was pushed back. Of the hundreds of Israeli startups in the sector only a small number survived and most of those have seen better days. Mobileye itself held another Wall Street IPO in December 2022 and saw its market cap jump to over $40 billion but it has now fallen back to $14.2 billion, below its IPO valuation.
But in recent months, autonomous vehicles have once again returned to the public dialogue and have once again attracted the attention of investors and regulators. The Chinese car industry is advancing in the field at a dizzying pace, and Elon Musk has announced intentions to commercialize a Tesla autonomous vehicle in two years, and the industry is undergoing structural and business changes. Just last week, GM's autonomous vehicle division Cruise was shut down, but at the same time, rivals in the field of autonomous vehicles such as WAYMO and Aurora soared to record valuations.
The big question is how Mobileye, a leading player in the autonomous vehicle market, sees its development in the coming years, and what role it will play. Interesting answers can be found in the presentation from the investor event, which the company held in Munich last week.
Dependence on China
China is the most active country in the world in autonomous vehicles. It has thousands of startups in the sector with thousands of trial autonomous cars on the country's roads and enormous encouragement from the government to developed advanced autonomous cars.
But a trade and technology war is currently raging between the west and China, which includes US sanctions on exports of advanced chips to China and the imposition of strict quotas on the import of Chinese electric cars to the EU. Consequently, the gates to the huge Chinese market have been gradually closing for western manufacturers of vehicles and parts.
This technological-national disconnect is problematic for the entire global chip industry, and especially for companies that develop advanced driving systems, such as Mobileye, which until recently hoped to ride the Chinese wave in the field of autonomous vehicles.
Alongside this, a fierce price war is underway in the Chinese car market, which is causing many manufacturers in the country to reduce costs and slow down the purchase of advanced driver assistance systems. As a result, Mobileye issued profit warnings for its operations in China this year, and its stock has plummeted.
But the geopolitical struggles are also creating new opportunities for the industry in the Western bloc. Concern that China will achieve supremacy in the field of autonomous vehicles, similar to the supremacy it achieved in electric vehicles, along with concern about sensitive data being gathered by "smart" vehicles made in China, are increasing the political and business motivation to accelerate the self-development of autonomous vehicles in the West. A different kind of political push for the field is expected to come from Tesla chairman Elon Musk, through his connections to the future Trump administration. First, promoting regulation that will allow autonomous vehicles to be sold commercially and driven on US roads, which has been stalled for more than a decade. Rivals may also benefit from this.
How much will it cost?
A decade ago, there were predictions that by 2025 the costs of the hardware and software required for advanced autonomous driving would plummet, and that the technology would become accessible to tens of millions of mass-produced vehicles.
The costs have indeed fallen, but certainly not to mass-production levels, and that is unlikely to happen anytime soon. According to Mobileye’s presentation, the cost of a comprehensive ADAS package that enables highway driving and autonomous parking without driver intervention currently ranges from $500 to $1,500, depending on performance. By 2026, the price is expected to drop to around $700-800.
To enable travel from one destination to another without the driver's intervention in steering or supervision, technology packages will be needed, the cost of which is expected to range from $2,000 to $5,000 in about two years, due to the need to include advanced radars and laser sensors (LIDAR). This is one of the reasons why Mobileye is developing its own advanced radar unit, and has announced a strategic partnership with Israeli laser (LiDAR) sensor developer Innoviz Technologies Ltd. (Nasdaq: INVZ), with the aim of integrating its product into the advanced driving packages that it will provide to its customers in the future.
But an autonomous package that eliminates the need for a driver in all road and weather conditions, such as Mobileye's DRIVE, is expected to cost around $50,000 by 2027.
This means that a driverless vehicle will reach the commercial market in the foreseeable future, benefiting from government subsidies or reimbursements, such as robo-taxis and perhaps also a handful of luxury vehicles, whose owners will be willing to pay the price for the innovation and comfort.
Mobileye estimates that the market volume of its advanced systems, which will enable free driving from point to point without intervention but with a supervising driver, will be about 500,000 units per year starting in 2027, while the market volume for full autonomous systems will be only about 12,000 units per year starting in 2027. In other words, the vision of a "driverless car" as many imagine it is still far from being realized.
Mobileye's latest presentation stresses, for the first time, the company's AI technologies and their use to improve the learning capabilities of autonomous vehicles. However, emphasizing AI activities in tech companies is a fashionable trend today, especially in publicly traded companies.
Mobileye also uses AI tools on a regular basis, and not just from recently. But there are some hints that this is a future strategic shift for the company and not just an attempt to flood investors with a point value. The company recently launched a new automotive chip (EQ6H) that displays significantly improved performance thanks to AI acceleration, and it is developing additional technologies unique to the car, which can also be applied in the field of robotics. This is already the clear territory of large specialized chip companies. It is reasonable to assume that as long as Intel is the company's main shareholder, Mobileye's activity in the field of chips is "for general use."
But Amnon Shashua already has his own startup operating in the field, and if and when Intel "releases" Mobileye from its grip, it is possible that we will see Mobileye's business development expand in new directions.
Published by Globes, Israel business news - en.globes.co.il - on December 16, 2024
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