Investors have poured billions into startups promising to get self-driving cars on the road to shuttle passengers and parcels. Now, the startup world has largely shifted to applying autonomous driving to specific industrial use cases — in an effort to build a business much faster.
Why it matters: Despite bold predictions that we'd soon be riding in robotaxis around town, the task is taking much longer than expected and is a lot more expensive.
- While established players will surely continue to find capital to fund their work, the math has become much less attractive to newcomers, especially as investors look for companies with clearer business models.
The big picture: The market for companies building fully self-driving cars that can give passengers rides has greatly consolidated, with a few large, well-funded players still pursuing that goal.
- And while they’ve made inroads and deployed pilots in cities like San Francisco and Phoenix, they’re nowhere close to operating a self-driving Uber-like service.
- Not even Uber is still trying to be Uber in this space. Uber and Lyft have sold off their autonomous driving divisions after sinking billions of dollars into them. Apple, meanwhile, has been floundering with its self-driving car ambitions.
- Others like GM-owned Cruise have started to test delivery capabilities in addition to its ride-hailing aspirations.
- Even Aurora, one of the early hopefuls of this category — and reportedly in talks to merge with a SPAC — has shifted its focus to trucking.
Between the lines: "Robotaxi, for a while, was the Auto-Tune of the autonomous vehicle world," Trucks Venture Capital managing partner Reilly Brennan explains. It was the shiny and attention-grabbing focus of the industry for a while, but that’s changed.
- "We have not seen a lot of robotaxi ideas from the early-stage in years," he says, contrasting it with 2015 through 2017, when his firm would see new startup ideas in this segment almost weekly.
State of play: Now, startups are focused on applying autonomous driving to more specific use cases and industries like agriculture and mining.
- This means automated driving that is low-speed, off public roads, not carrying passengers and has a high business value to customers.
- "If you're doing a Series A company right now and you're doing robotics and automation, you need to have revenue," says Brennan.
- A lot of the companies are also building software and other tools for for advanced driver-assistance systems (ADAS), coming to market more quickly.
The upside: These industry-focused companies could become much more valuable than what we've seen so far from self-driving car startups, thanks to their ability to get to market much faster and the potential to build large businesses if they truly provide more efficiency to their customers.
- For context: Together, robotaxi companies Cruise, Zoox and nuTonomy were acquired for about $2.3 billion.
The bottom line: "My personal opinion about this is that we're never gonna have Level 5," predicts Brennan, referencing the classification for fully self-driving cars.
- "Only humans are dumb enough to think they can drive in all conditions — robots are smarter than that."
What’s next: "If 2020 and early 2021 was defined by electric vehicle SPACs, it appears that the rest of this year is gonna be autonomous SPACs," predicts Brennan, who notes a change in the types of companies sponsors have been recently asking him about.