Driverless Cars, Wrong Direction

According to different estimations — these stats are not reported regularly — $30B per year, give or take, are invested globally in helping cars manage without a driver. The driverless car market is driven by car manufacturers, venture capital firms and hundreds of startup companies. To me, this is possibly the most colossal collective failure in modern innovation history. Yes, that bad.

Here’s a prediction. Your kids will still drive. Here’s another prediction. Your grandkids will drive as well. Self-driving techniques will definitely assist in driving better and in reducing the number of accidents, but the array of problems presented by driving is so wide, that artificial intelligence is at least a generation or two away from solving them, or the ones that actually matter. And this is before the challenges of global scaling, driver education, road infrastructures, public opinion, and regulatory compliance.

But that’s not the bad news.

In the meantime, there are about 1 billion cars on the roads and their number is growing pretty fast. Car manufacturers are pouring 70+ million new cars into the market every year and this number is on a pretty steady increase. Chine domestic consumption alone has grown to 25 million cars per year, doubling itself in less than a decade.

Car sales are predicted to cross the 100 million per year mark by 2020. Cars in used are set to double and cross the 2 billion mark by 2040. We’re on a sure path to a global standstill, at least in metropolitan areas.

And this is horrible news.

Cars are presenting our planet with two problems that are not going anywhere. Density and gas emissions. These problems are not going to be solved by the cars driving themselves. Simple logic would point at two other directions as the most effective and direly needed: alternative (and clean!) energy development and getting cars off the road, instead of focusing on making cars easier to drive.

Yet, for some unexplainable reason, a lot of smart people think making cars driverless will actually reduce the number of cars driving around. In fact, this line of thinking has become so dominant, traditional firms such as KPMG are actually predicting car sales will drop by over 50% by 2030.

That’s right. Making cars easier to drive, cars that can find their own parking spots or hover around the block while we’re working or shopping, cars that you can still use under the influence of alcohol, that you don’t need a drivers license to drive, the availability of these cars will actually reduce the number of them on the road.

Yes, this is as silly as it sounds.

There’s a car for 1 in every 7 human beings today. Plenty of growth potential. Let’s examine the other 6 for a second.

30% of the world population is under 18. Driverless cars will grant them the ability to drive. 15% of the world population are over 65, some of them have given up car ownership. With driverless cars, they will be safe and happy in their own cars. Increasing density would mean people will spend hours and hours on congested roads but will now be able to take their eyes off the road and back to their cellphones. The car will be safer from accidents due to constantly improving manoeuvrings capabilities. Yes, It would make more sense for them to own an affordable small car.

But if you ask Silicon Valley investors, many of them are convinced self driving will reduce the number of cars.

This conclusion is so absurd in terms of simple logic it must have some hidden wisdom.

And there’s one indeed. Except that it’s not really wisdom but a fantasy. Apparently, the number of cars on the roads will decrease because today’s kids no longer care about owning a car.

Or at least that’s what adults say. My own kids? They can’t wait to drive and they already fantasize about their first car. Think differently? Try to get them to share their cell phones.

So here’s the thing. Kids will still want to own their cars when they grow up as people always did. Vehicles will be cheaper and more affordable. Older people will definitely choose to own their cars and not share them. And with self-driving solving the two main headaches of modern driving: the search for parking and traffic jam rage, even car haters like me will think twice before disowning their own vehicle for sole dependency on a cloud computer deciding when to pick up the kids from their soccer practice.

And yes, driverless cars will have a dramatic impact on the number of cars on road. It will increase it. Fortunately, we’re too far away from this becoming reality.

The two biggest problems, congestion and fossil fuels, remain and require urgent attention, particularly the second one.

If car sales grow by as little as 2% per year, alternative energy will need to grow by a whopping 10% per year in order to catch up by roughly 2050. If car sales continue to grow at 4% a year, and if alternative energy replaces fossil fuel by 5% a year, which is faster than today’s rate, we’re looking at a century or two-century span for meeting a possible tipping point. The number of cars on the road by that time would have tripled and quadrupled. Our planet is expected to be 2–3 degrees warmer by then, on average. This is an absolute disaster.

It’s time we refocus our attention on what’s really important. It’s not who drives the car but how to develop alternatives that would make it a lot easier to not need a car at all. And when we do need one, how do we make sure it can get off the ground and consume energy that isn’t killing our planet and future. At the current course, our pipe dreams are driving our cars into a jam and our planet into the ground.

April’s Automotive Fever

This April began with a ‘fast and furious’ spree of automotive investment, probably thanks to the historic $15 billion acquisition deal of ADAS manufacturer Mobileye by Intel. The open window for future IPOs on Wall Street after Snap went public also added some fuel to the investors’ extravagance. And with Uber, still the most highly valued private tech company, showing vulnerability, there’s a place for much more. Finally, car manufacturers have fully realized the need to become a tech company, and with the understanding that they must build a smart device on top of their wheels and engine, their hunger for tech is right now insatiable.

Here are some of the exciting deals that were recently announced, with links to Zirra’s full Premium Insight reports on each of them:

Lyft

Lyft managed to take advantage of Uber’s recent scandals to add users, drivers, and $600 million. A few days ago the ride-hailing company announced it had closed a $600 million round of funding at a $7.5 billion valuation. This brings the company closer to $3 billion in total funds since its establishment five years ago. [Read here for Zirra’s Premium Insights report on Lyft]

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Lyft says it enjoys a surge of about 60% in passengers week over week since the start of Uber’s scandals back in January.  First, Uber broke a taxi driver’s strike and then suffered a high-profile ban as a consequence. Since then, the company’s reputation has continued to deteriorate. In February, a former engineer at Uber wrote about enduring sexual harassment and discrimination there. Later,  a video surfaced showing CEO Travis Kalanick berating an Uber driver who complained that Uber’s price cuts had driven him into bankruptcy. And recently, Google’s self-driving car unit sued Uber, alleging it had stolen its ideas.

But Lyft didn’t just raise money because Uber is in trouble. Lyft had to raise funds in order to support itself after the loss of Didi Chuxing as its partner in China. Also, Uber’s deep pockets force Lyft to keep subsidizing rides and support expansion into more cities in the U.S. Unlike globally-wretched Uber, Lyft has no other territory to go to, so it has to give all that it has got on American soil.  [Read here for Zirra’s full Premium Insights report on Lyft]

Valens

Valens announced a $60 million round a few weeks ago, led by investors such as IGP, Delphi, Samsung Catalyst and Goldman Sachs, after it proved it is on the right track as an automotive chip maker. Valens has recently launched a hardware device for smart cars, partnered with Daimler (Mercedes) and formed a new alliance that standardizes content streaming in cars (HDBaseT). [Read Zirra’s deep analysis report summary of Valens or the shorter Premium Insight report]

Valens has developed a chip that allows a single relatively simple cable to transmit high-speed video and audio, USB and data from multiple streams within a car. With this technology, car manufacturers will be able to allow drivers to listen to music, stream video or use apps directly from their phone to the infotainment system at the highest quality a car can offer. At the same time, the channel can be used for self-driving protocols and telematics systems. As of today, no other company offers these capabilities all together.

However, according to Zirra, Valens faces quite a few challenges: The semiconductor market has been undergoing consolidation lately, with Avago acquiring Broadcom and Qualcomm acquiring NXP. This creates a field with more dominant competitors for Valens to take on, but could also portend a lucrative eventual sale of Valens to an industry-leading semiconductor company; But Valens’ biggest challenge is to succeed in marketing and creating partnerships to gain traction in the automotive industry and edge out their much bigger competitors who offer inferior solutions. [Read Zirra’s deep analysis report summary of Valens or the shorter Premium Insight report]

Otonomo

Otonomo, a startup that tries to give the power of smart transportation back to the car manufacturers, also raised $25 million this month in a strategic round led by Delphi, only five months after it had raised $12 million from VCs such Bessemer and StageOne.

Otonomo is a cloud platform that aggregates data provided by car manufacturers and connects it to third party services such as insurance companies and software developers. In that way, car manufacturers can have ownership over data produced by their vehicles, data they have lost to OBD dongles and applications that are connected to them. [Read here for Zirra’s Premium Insights report on Otonomo].

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