"Mobileye could leave Israel in an instant"

Amnon Shashua

Amnon Shashua fears Israel will miss a historic opportunity to lead the automotive revolution unless regulatory change is speeded up.

Parked one floor below ground in a building in Jerusalem’s Har Hotzvim industrial zone are five or six Mobileye autonomous vehicles. In ordinary times, they host an average of three visitors a week. Automakers, suppliers - even representatives from competing companies - come for an up-close driving experience. They ride between Begin Highway and Emek Refaim Street, or between the Rehavia and Katamon neighborhoods, trying to figure out how soon the coming revolution will arrive. At present, Mobileye teams are taking advantage of the no-visitor period for accelerated development, bug fixes, and efforts to make their car even safer.

A few floors above them sits a team that also includes people from Moovit, which Mobileye acquired two months ago in a $1 billion deal. Last week, was the first time they presented several new development integrations to Prof. Amnon Shashua, Mobileye co-founder and its president and CEO. Shashua led the investment in Moovit, about a year and a half ago, and then its acquisition. Fifteen minutes after he first met Moovit founder Nir Erez, Shashua realized the company fit his broader vision.

Moovit joins Mobileye in a revolution that’s bigger than autonomous vehicles: the transportation revolution. Instead of settling for developing autonomous vehicles with automakers, Mobileye has decided to move several stages up the value chain to offer a range of services, including providing autonomous vehicles to public transport operators (bus and taxi companies), or operating public transport services where Mobileye itself would be customer-facing. Moovit, developer of a journey planner app, is slated to assist in executing the plan.

In an interview with "Globes", Prof. Amnon Shashua discusses regulatory barriers, the potential impact of the Covid-19 crisis on the autonomous vehicle industry - and on Mobileye - and the moment he realized that Mobileye's role goes far beyond selling cars.

"We started developing the vehicle in about 2014. Two or three years later, I realized what needed to be done," he says. "It’s easier to get through the regulatory process with a fleet of vehicles, because then there's someone responsible who has a reporting obligation. You must prove that you have experience in many territories. If I come before the regulator in Italy and say 'I have a fleet of vehicles in Jerusalem', they’ll want me to set up a fleet in Milan before granting approval. That's why we needed to set our sights on autonomous taxicabs, a $160 billion market. We couldn’t skip directly to selling autonomous vehicles to private end-users, which is a market in the trillions of dollars. " Shashua adds, "After being acquired by Intel, once I understood we had hundreds of people in Haifa, for instance, who could help us design our future microprocessors, we realized we had certainty, and an opportunity to think even farther ahead, and take more risks. So, I put together a plan. That was a few months after we were sold to Intel."

The timetable: Enthusiasm stymied by regulation

Three or four years ago, autonomous vehicles were one of the most talked about, exciting things in the world. The realization that the world of transportation was set to undergo a transformation not seen in decades, the entry of technology companies into the field, and the realization by traditional automakers that they needed to change - all together created a fascinating business dynamic. But enthusiasm seems to have cooled over the past year. Technological developments haven’t progressed as quickly as was hoped, the regulatory infrastructure is delayed, and the Covid-19 crisis has hurt car sales, and thus the manufacturers’ financial strength.

"It's not that the vision of the autonomous vehicle is delayed, but it has morphed into two phases. Regulation, mapping and cost reduction - these elements take time, which is why we need the Robo-taxi. We can’t jump straight to autonomous vehicles for the private consumer. Regulation is always an acute problem in these cases, because it’s a case of a machine that can do damage. Suppose I assure you that the self-driving car is ten times safer than a human-driven car. There are six million accidents reported in the United States, which means we could cut it down to 600,000. That’s good news, but whoever developed the technology is responsible for 600,000 accidents.

"In terms of cost, our system today costs about $20,000, before we make any profit on it. We expect that, by 2025, sales to private consumers will begin, and that by then, the cost of the system will have dropped to $5,000, and there will be progress in regulation and in mapping technology.

"We’re also working with NIO of China," Shashua points out. "They want to sell private vehicles with high levels of autonomy as early as 2022. They claim they can manufacture at a lower cost - close to $10,000. We have to see if it's good enough quality. From a regulatory standpoint, China is more advanced. I wouldn't want to live in a centralized regime, but there are some advantages - they move faster. Three months after we published our mathematical model, it had been translated completely into Chinese. Four months later, they issued guidelines for the establishment of national standards. In the Chinese and Asian cultures, there’s no problem with taking something from someone else, it's even considered a compliment. In this case, it suited us. We believe the whole issue of safety should be transparent, otherwise no government entity will adopt it."

How has the crisis affected the auto industry?

"It's a very fluid situation. A month ago, I’d have said I expected new car sales to fall 20% this year. But something else has been happening during the past week. On the one hand, consumption has stalled. On the other, there’s some concern about taking public transportation, and there’s an increase in new vehicle purchases. Dealers in the US are at 90% capacity, and in Israel, too, dealers are starting to report positive indications. I believe the year will end on a downturn, but not significantly."

And how has the crisis affected Mobileye?

"One of the nice things about us is that, on the day we did the deal with Intel, Mobileye had $1 billion in the bank. We are a super-profitable company. We ended 2019 with close to $1 billion in revenue. This year will see a decline, but we’ll manage. Regarding [our] ADAS (advanced driver assistance systems), we don’t foresee any change in upcomingmodel launches, because that's a big deal in the automotive industry - it takes three years of work to launch a new model car. We didn’t rest for a moment during the lockdown. We continued supporting production processes 100%, and we didn’t furlough anyone. Our outlook is very clear."

Where do traditional manufacturers stand regarding autonomous vehicle development?

"This has never been an automobile manufacturers’ game. It’s always been in the tech producers’ court, and the automotive industry has come to recognize this. I think that the manufacturers' dream of building an autonomous vehicle has faded. Some manufacturers have purchased startups; GM acquired Cruise, and Volkswagen bought Argo AI. Manufacturers realized that this was hard to fund - about a billion dollars a year - so they brought in outside investors like Softbank. There is a very small number of players that can go all the way, like Waymo and Cruise.

Israel: En-route to an on-road pilot in 2021

Two years ago, Volkswagen CEO Herbert Diess visited Israel and met with Prime Minister Benjamin Netanyahu and emerged with a promise for a smooth regulatory path for autonomous vehicles. Diess contacted Shashua and offered to launch a joint venture in Israel: an autonomous taxi service.

"Something special happened here. With autonomous vehicles, you cannot separate development from practical application, and if Israel doesn’t have autonomous vehicles on the roads, then continuing development here is pointless. If, for example, our first territory was to be San Francisco, we’d have to move our smart people to the US. We were already considering building a site in San Jose. [Volkswagen] solved a big problem for me."

Why didn't you just ask Netanyahu to take care of the regulation?

"It didn't occur to me. Most Israeli tech companies don’t have a market in Israel. We have the most amazing development people here, but no sales. What the Israeli public knows about us are the beeps from our ADAS system, but that's only 1% of our revenue."

Mobileye, Volkswagen, and importer Champion Motors have scheduled a pilot to start next year, and Shashua indicates things are on schedule. Approximately 100 autonomous cars are expected to go on-road in Tel Aviv and Jerusalem. The pilot will last about a year and only pre-registered people will participate. The vehicle is an Autonomous Level 4, where a driver still sits behind the wheel in case intervention is needed.

However, Shashua warns there have been delays in passing the necessary legislation. "There was backing and committees were established. Everyone is in favor, but resources in Israel are limited and the squeaky wheel gets the grease. There is an opportunity now [to make the changes needed, viathe Economic Arrangements Law that accompanies the state budget. Other countries are already starting to move faster than us - Britain, France, Germany, Singapore and some states in the US are already preparing legislation, making autonomous vehicle travel [in those places] possible as of next year and 2022. Meanwhile, Israel is catatonic.

"The autonomous vehicle is just the beginning of a real industry here. Israel’s entire auto-tech industry has evolved around the promise of the autonomous vehicle and Mobileye's success. You don’t need Ladar and other technologies if there is no autonomous vehicle. There are 600 auto tech companies in Israel, but that number could fall to 50.. The ecosystem here is worth billions but it could well be that, sometime soon, Intel HQ might say: 'Wait a minute, the horse has bolted. Amnon, we told you to run the pilot in Germany or the US. Why did you get stuck in Israel?'

"We have a responsibility. We employ 2,500 people. Our motivation is the amazing revolution we’re creating. I really want it to be in Israel, but it's important that our decision makers also understand that you can't take high-tech for granted. Someone who sells fashion is stuck here. He can make threats all day long but he can't move operations to Milan. We, as a high-tech company, can move in an instant. My message to the decision makers is: there is a huge industry where Israel has the opportunity to be a leader, and that requires our decision makers to live up to their promise to provide regulatory backing.

"As soon as Israel becomes a leading territory for autonomous vehicles, more players will come. Suddenly, Yandex started tests here. Apparently, they also understood that the regulation was being delayed, because they seem to have had the wind taken out of their sails. We don’t hear about them anymore. There are 15 car companies with development representatives in the country, that can only grow. Mobileye isn’t the only player, but we can open the door, and these 600 companies will thrive."

Shashua (60) still lectures at the School of Computer Science at the Hebrew University of Jerusalem, while also serving as a senior vice president at Intel Corporation and president and CEO of Mobileye. He recently increased his holdings in Israel’s first digital bank venture after acquiring shares held by Marius Nacht. Shashua refuses to comment on this matter.

During the interview, Shashua uses of the word "daring" several times. As a person who’s founded an Israeli company to develop autonomous vehicles that competes with some of the world's biggest companies, led it to an exit at $15 billion, and who can be considered among the most important people in the automotive world (of the future, at least), he is capable of admitting his company’s limitations.

"You have to be daring carefully, because it involves a great deal of investment, you don't want to fall. For Mobileye, being on our own was too much for us. Even as it stands, the autonomous vehicle market is a big one. The distance between where we were during our IPO, and where we are today, is big. And the moves we’re making now are an even greater leap.

"The deal with Intel was the best thing we’ve done," says Shashua. "We are an independent company in every way, but instead of having 20,000 shareholders who constantly create volatility, I have one shareholder. We have a shared vision and that helps me; if I need help with development or regulation. We’re in a position where we can dare more without giving up autonomy. It's rare; most mergers and acquisitions are not like this - they involve integration. This way allows our vision to be realized. "

When Intel acquired Mobileye, the connection to its semiconductor activity was understandable. Isn't Moovit getting into a hazardous adventure, into a business that's a far cry from its core activity?

"They understand that data has two faces - the first is hardware infrastructure and the server farm, and the second is owning the data and find ways to generate revenue from it. Data is the new oil. It's very natural for them, but they didn't know how to do it. Capitalism means growth - if you stand in once place, you fall. Then a subsidiary [Mobileye - O.Z.] comes along and tells you it knows how to do it. Autonomous vehicles are creating a market that’s larger than Intel’s.

"There's also machine learning-driven automation. To date, it has been implemented in robotics, but the revolution means that even our most boring cognitive actions will be executed using machine learning. If you want to benefit from it, you can’t just build the infrastructure; you have to produce the content, too. That’s artificial intelligence.

"If you look at the statements from Intel and its CEO, references to Mobileye are disproportionate in relation to our revenue, which is just $1 billion out of revenue of $70 billion. They could have told me to get on with my work quietly, but on the contrary, Intel is highlighting it."

Prof. Amnon Shashua

Shashua (60), married with three children, is a professor at the School of Computer Science at the Hebrew University of Jerusalem, and a senior vice president at Intel Corporation and president and CEO of Mobileye. Born in Givatayim, Israel, he served as an officer in the IDF Armored Corps. In 1993, as part of his work in the artificial intelligence laboratory in MIT, he completed a Ph.D in cognitive and neuroscience. In 1999, he founded Mobileye together with Ziv Aviram. He has advised the government on policy for handling Covid-19, and he recently acquired control of Israel’s first digital bank venture.

Mobileye by numbers

$879 million: Revenue in 2019
$245 million: Operating profit in 2019
1%: Mobileye’s revenue as aproportion of Intel's total revenue
2,500: Number of employees
$15.3 billion: The largest acquisition of an Israeli company (completed in August 2017)
21 years - From initial idea to Moovit acquisition
1999 - Established by Amnon Shashua and Ziv Aviram
2014 - Starts developing an autonomous vehicle
2014 - IPO at $5.3 billion market cap
2016 - Announces collaboration with Intel and BMW to develop autonomous vehicle
2017 - Acquired by Intel for $15.3 billion
2019 - Announces collaboration with Volkswagen to establish autonomous taxi venture
2020 - Acquires Moovit in a $1 billion deal

Published by Globes, Israel business news - en.globes.co.il - on July 6, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Amnon Shashua
Amnon Shashua
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018