One of the most interesting announcements during last week's visit to Israel by new Intel CEO Bob Swan was that a fleet of autonomous electric vehicles would be on Israel's roads in 2020, as part of an advanced trials for launching a robo-taxi service in Israel. The project is in cooperation with the Volkswagen group and Champion Motors, Israel's VW importer.
This was a reminder that one of the world's most advanced "mobility as a service" (MAAS) projects is being carried out right under our noses. This will make Israel one of the first members of an exclusive club of developed countries in which such infrastructure will be operated in the coming years.
For now, the project is being kept under a heavy shroud of secrecy, and details of its progress are hard to come by. When we look at the broad picture, however, we discover an arresting entanglement of cross-interests, global and technical business battles, and regulatory pitfalls. The effect of these factors goes far beyond a few dozen or hundred autonomous electric taxis that may or may not travel on the roads in the Tel Aviv area. How realistic is the intermediate target of 2020?
The competitors are not indifferent
MAAS rather than privately owned vehicles is the great business hope of the global autonomous vehicle market. In contrast to a driverless private vehicle, which will be the preserve of the wealthy, if available at all, autonomous transit services will attract substantial government subsidies in the coming years. These subsidies are expected to cover the cost of development (no subsidies are in store in Israel in the first stage), generate profits, and satisfy investors. They will also provide positive public exposure to the idea of driverless cars, which many still find frightening, and will create a solid base for regulation. In short, the direct and indirect market will be in the tens of billions.
The lively interest that the sector is attracting goes beyond the car industry. It extends to major IT firms, such as Google and Baidu, Google's Chinese counterpart. Google is active in this market through its Waymo subsidiary, which until now has focused on the US, while Baidu wants to become a leading MAAS player in the huge Chinese transportation market and elsewhere. These companies straddle many sectors and have inexhaustible resources. They can afford to absorb losses and multi-billion dollar investments in order to get what they deserve. In order to illustrate the point, the most recent quarterly investment in Waymo, reported by Google through its parent company, Alphabet, was $1.2 billion.
Business gorillas of this caliber do not like new competitors. A few weeks ago, however, Intel officially announced that its Mobileye subsidiary was becoming a tier-2 supplier in advanced driver-assistance systems (ADAS) for a division that would offer third party customers a complete software and hardware autonomous transportation services solution on the basis of mass-produced vehicle models. Proof of concept is provided by the project currently being set up in Israel in cooperation with Volkswagen.
Entirely predictably, the announcement was not equably received by the competitors. The first response was a symbolic announcement by Waymo, issued almost simultaneously with Swan's visit to Israel, of the signing of a strategic agreement with Renault-Nissan-Mitsubishi, one of the world's largest auto corporations and an old customer of Mobileye in the ADAS field. The announced purpose of the agreement in the first stage is to develop a complete MAAS infrastructure package, with an emphasis on the French and Japanese market.
A few days later, Baidu took even more aggressive action by announcing that it had finished development of a complete Level 4 autonomous vehicle solution, based totally on cameras and machine vision, under the Apollo Lite name. In a seminar accompanying the exposure, Baido claimed that its system, which used 10 cameras and high-speed processors, provided an autonomous vehicle with the ability "to process enormous quantities of information," and that it had already successfully passed a series of field trials on Chinese roads.
There is no way of knowing whether the company's claim is true, and whether this system is really ripe and ready for mass commercialization at a reasonable price. Assuming that it is true, however, it explodes a bomb in the global market. It is the first time in 15 years that someone is trying to challenge Mobileye's hegemony in the field of ADAS based on the cameras and chips for machine vision on which Mobileye's leading position in the industry is based.
If any doubts remained about who the Chinese are training their sights on, they were removed when Baidu reported on its WeChat account last week, "In the course of tests, the performance of the Apollo Lite system were comparable to those of the sensor system based on the cameras of Mobileye, the world's largest supplier of advanced driver-assistance systems."
Last year, Mobileye joined Baidu's impressive international database, which contains auto and IT companies that support its Apollo open operating system. It also signed an agreement for installing its safety model in the system. At that time, however, Mobileye was only a tier-2 supplier in training. Today, it is a contractor of comprehensive solutions, has a healthy share of the Chinese vehicle market, and wants to offer Chinese companies a complete MAAS solution that in future will compete with those of Baidu.
Add to that the fact that Mobileye is a branch of a US company, and the Chinese do not at all like Mobileye's "black box" approach, which does not provide access to its system's original code, and what you get is an exciting business contest.
We will not be surprised if Baidu's action was taken with the encouragement and support of the Chinese government, given its aim of breaking the dependence on the US chip industry. In any case, what sparked the global war was Israel's autonomous taxi project.
Volkswagen is not an innocent tourist
The Volkswagen group has had a fairly advanced MAAS project in Europe for the past three years, based on autonomous commercial vehicles that take passengers for payment on the streets of Hamburg. Many in both Israel and Europe therefore wondered why Volkswagen chose to enter a joint program with Mobileye-Intel in Israel's small and troubled market.
Surprise grew after it turned out that Mobileye-Intel wasted no time in turning the Volkswagen project into an international stamp of credibility for its capabilities in the sector. In the future, these will be offered to third party customers, some of whom compete directly with Volkswagen.
We can calm down, however: Volkswagen is not an innocent tourist being used by locals in Israel to make a quick profit. From Volkswagen's point of view, the project will provide it with access, precedence, and a field for trials of both Intel-Mobileye's most advanced technology before its worldwide marketing and Israeli-developed complementary and very advanced sensor and processing technologies.
Volkwagen will reproduce the accumulated information in markets that are far more important for it in terms of future cash flow and revenue, such as the Chinese market. This is not a wild conspiracy theory. For example, in late May, Volkswagen announced that its subsidiary had signed a strategic cooperation agreement with Chinese auto manufacturer JAC and the Hefei district local government. The parties agreed to establish a public transportation system based on an autonomous electric vehicle.
No hurry for the Ministry of Transport
In contrast to the global interests whose effect will probably be in the medium and long-term, the immediate obstacle in the project timetable is Israeli regulation. Israel made things easy for itself by adopting European regulation in toto.
Israel should break through ahead of Europe in this area, but in order to do that, it will have to change the existing traffic regulations in charged and sensitive areas, such as assigning responsibility in accidents in which the parties involved are autonomous vehicles, right of way in traffic lanes for such vehicles, subsidization of rates, etc.
Even in a normal situation, regulatory activism is not exactly the Ministry of Transport's strong point, especially in the politically sensitive taxi market. Add to that the lack of a stable government during the waiting period for the Israeli elections (both of them), and what you get is a serious pitfall in the project's timetable.
Published by Globes, Israel business news - en.globes.co.il - on June 26, 2019
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