The first step for self-driving car companies to make money is not the autopilot

The first step for self-driving car companies to make money is not the autopilot

A WeRide robotic taxi with sanitary supplies drives to Liyuan District on June 4, 2021 in the southern Chinese city of Guangzhou.

Southern Metropolis Daily | China Optical Group | Getty Images

BEIJING – While governments may be wary of self-driving cars, people want to buy technology, and companies want to make money.

It is a market for a limited edition of self-driving technology that helps drivers with tasks such as parking and changing lanes on the highway. McKinsey expects the market value of a basic form of autonomous driving technology – known as “tier 2” in an autonomous driving rating system – to be 40 billion yuan ($6 million) in China alone.

“L2, improving the security value for users, and its commercial value is very clear,” Bill Bing, partner at McKinsey in Hong Kong, said Monday in Mandarin translated by CNBC. “The axis of the robot is definitely a trend, but it is not [yet] It has a marketing consequence.”

Robotaxi companies have made great strides in the past several months in China, with Baidu and Pony.ai being the first to gain approval to collect fees in the Beijing suburbs area and other parts of the country. Locals are excited—Apollo Go service for Baidu robotics claims to be recording nearly 2,000+ flights per day.

But when it comes to revenue, robotaxi apps show that companies are still hugely supportive of rides. At the moment, the money for self-driving technology is in software sales.

profitable technology

Investment analysts from Goldman Sachs and Nomura point to opportunities in the automotive software itself, from in-vehicle entertainment to self-driving systems.

Last week, Chinese self-driving technology startup WeRide said it had received a strategic investment from German engineering firm Bosch to produce its driver assistance software system.

The goal is to jointly develop the L2/L3 system for mass production and delivery next year, said Tony Han, WeRide founder and CEO of CNBC. L4 defines the ability to be fully autonomous under certain conditions.

“As a collaborator, of course we want to sell this product [in] Like many auto OEMs in China so we can maximize our products [revenue and] Referring to the car manufacturers, he said, “We really believe that L2 and L3 systems can get people to drive cars.” [more] safely. “

In a separate release, Bosch described the deal as a “strategic partnership” and said its China business will provide sensors, computing platforms, algorithm applications and cloud services, while WeRide will provide the software. Neither company shared the amount of capital invested.

The deal is “very important,” said Tu Li, founder of Beijing-based consultancy Sino Auto Insights. “This is not just a venture capital firm that sees potential in the market as a whole and invests in the sector.”

He expects the next step for marketing will include getting more WeRide technology “installed on OEM partner products in order to launch more pilots in China and try out paid services so they can adjust business models and better understand pricing dynamics and customer needs.”

WeRide is worth $4.4 billion, according to CB Insights, with backers like Nissan and Qiming Venture Partners. WeRide is operating robotics and automated buses in parts of the southern city of Guangzhou, where it is also testing self-driving street sweepers.

CEO Han declined to talk about specific valuation numbers. Instead of needing more money, he said, his main concern was how to reorganize the startup’s engineers.

“Since Bosch is in charge of the integration, we really have to spend 120% of our time helping Bosch with the integration and adaptation business,” said Hahn. WeRide has yet to be announced.

Chinese stock play

For publicly listed Chinese auto software companies, Goldman’s self-driving topical picks include ArcSoft and Desay SV.

Analysts said the outsourcing business model in China gives independent software vendors more opportunities than in the United States, where software is developed in-house at companies like Tesla. Beijing also plans to have L3 vehicles in mass production by 2025.

“Automotive OEMs are investing heavily in auto/digital software through 2025, and are targeting $20 billion in software revenue to be obtained by the end of the decade,” Goldman analysts wrote in mid-March.

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They estimate that for each car, the value of the software inside will rise from $202 per L0 car to $4,957 per L4 car in 2030. For comparison, the battery component costs at least $5,000 today. By that calculation, the market for advanced driver assistance systems and self-driving software is set to rise from $2.4 billion in 2021 to $70 billion in 2030 — with China accounting for about a third, analysts expect.

In September, General Motors announced that it would invest $300 million in Chinese self-driving technology startup Momenta to develop autonomous driving for GM vehicles in the country.

“Customers in China are embracing electrification and advanced autonomous technology faster than anywhere else in the world,” Julian Plesset, executive vice president of General Motors and president of GM China, said in a statement.

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