Company / division: Carmakers
I’m on record as being very skeptical that Tesla can achieve its production targets for the Model 3, given both its patchy track record on meeting such targets in the past and the massive ramp the Model 3 production schedule entails. This report from Reuters suggests that Tesla is banking in part on an unusual strategy for manufacturing, under which it will move straight to ordering and installing the final assembly line tooling, rather than testing the manufacturing process with “soft tooling”, which is easier and cheaper to replace if something’s not working. That skips a stage in the production ramp, which should accelerate things, but will only work if Tesla’s computer modeling is effective in helping it get the tools order right first time. So it’s definitely a gamble, and one which could either pay off in a big way and allow Tesla to get to its target production more quickly, or actually delay production or lead to defects in the cars. Even with this approach to manufacturing, it’s still not clear to me that Tesla can accelerate its output fast enough to meet its targets. So while there’s some upside in that it may get somewhat closer to meeting its goals, the downside is potentially much bigger if things go wrong. What’s crazy here, of course, is that all these challenging deadlines are entirely self-imposed – it’s Tesla that insists on promising so much and then underdelivering.
Elon Musk Tweets About Future Tesla Products Including Semi and Pickup Trucks and a Convertible (Apr 13, 2017)
GM has filed for and received a tax credit in the sum of $8 million from the state of California in return for investing $14 million in office space and related items this year and committing to hire 1163 employees over the next five years for its self-driving tech subsidiary Cruise. Given how the importance of autonomous driving technology will grow in the coming years and the fact that California is the hub of much of the testing, it’s logical that GM would want to increase its base there significantly. However, these 1163 employees represent a more than three-fold increase in its employee base in the state, and the average salary GM is projecting for those employees is $116,000, so my guess is they’ll mostly be skilled engineers.
Cadillac takes aim at Tesla’s Autopilot with ‘hands-free’ Super Cruise technology – The Verge (Apr 10, 2017)
One of my big objections to Tesla’s Autopilot technology has always been the name, which connotes a level of autonomy the system doesn’t actually aspire to and which it certainly doesn’t deliver. Tesla has partly dealt with that issue by updating its software to require users to keep their hands on the wheel, but does little else to ensure attention, which means that even when the system performs as it should, there’s little guarantee that the human driver will. Cadillac today announced a new Autopilot-like feature but very sensibly named it in a way much more likely to give buyers and users an accurate impression of what it does, tying it to the very familiar cruise control already in almost all new cars. However, the more important thing in my view is that the system also comes with lots of protections designed to ensure that the driver does actually pay attention, which is a huge issue in situations where attention but not activity is required, such as driving a car with this kind of intelligent cruise control running. There’s a long history of scientific research in this area, and it all says that paying attention in a passive way like this is something human beings aren’t good at, and Cadillac’s new system is designed to help the driver stay attentive. The big question about this new system, though, is that although it’s being billed as LIDAR-based, it’s not using a LIDAR in the car but instead using mapping data previously generated by LIDAR, which means it’s non-real-time. That, in turn, means that if anything has changed in the road environment since the map was generated, the car won’t know about it, and GM doesn’t seem to have talked much about how frequently it’s going to update its maps of US and Canadian highways to mitigate this.
via The Verge
Tesla is now worth more than Ford after delivering a record number of cars for the quarter – Recode (Apr 3, 2017)
There are two things here: firstly, Tesla’s Q1 delivery number, and secondly what’s happened to its share price since it was announced. Stock valuations are interesting, but far from definitive as indications of what companies are worth or who’s “winning” in any meaningful sense. Tesla’s stock price is all about trajectory, and an unusual (perhaps even unwarranted) amount of investor confidence and enthusiasm that the company which is currently very small and unprofitable compared to its legacy peers will quickly catch up on both fronts. That, in turn, requires believing in Tesla’s manufacturing projections, which require a massive increase in its growth rate, from 56% annual growth in the past year to something much faster to hit its 500k target for 2018, which would be a six-fold increase over its 2016 numbers. Long-term, it seems very likely Tesla will reach that kind of scale, but given its track record, there’s every reason to believe it will hit this and other related targets later than it has projected. On that basis, then, the valuation seems that much less justifiable on the basis of any near-to-medium-term results.
This article is based on a study by a company called Navigant Research, and it seems to be an evaluating of companies’ strategic assets rather than any actual capabilities today, so it’s worth noting that context for their rankings of companies here. Notably, they rank traditional carmakers in the first six spots, with Waymo apparently the first non-traditional / tech company in the rankings. That’s notable, because all the numbers suggest Waymo is out in front in testing of autonomous driving technology in California by a long way, and although we don’t have equivalent data for Michigan, where Ford does much of its testing, I’d be surprised if it had done many more miles. So this is mostly an evaluation of the benefits the big automakers derive from their existing massive scale and capabilities in building vehicles and bringing them to market, something none of the pure tech companies has (Tesla, of course, has some small-scale manufacturing capability and is looking to ramp fast, but comes in 12th in the rankings nonetheless). This jives with my perception that, even as these tech companies do increasingly well in developing their own technology, they’re very unlikely in most cases to build the cars, and as such the traditional car companies are still in a position of strength and potential leadership when it comes to actually building and deploying the technology.
via USA Today
China’s Tencent Buys 5% Stake in Tesla – WSJ (Mar 28, 2017)
Tencent has been one of the most active Chinese investors in the US tech industry, and here’s another investment. It already has stakes in both Uber and Lyft, and although Baidu has been making bigger direct investments in autonomous driving in the US, Tencent’s indirect investments in transportation in the US are growing. This is a nice vote of confidence in Tesla at a time when it’s trying to raise money to fund the Model 3 manufacturing ramp, and it also gives Tencent decent exposure to what has been a nice growth stock so far this year.
I think it’s safe to say that Tesla’s plans for Model 3 manufacturing represent the biggest test the company and Elon Musk have faced by a long way. The ramp contemplated is so rapid and takes the company so far beyond its historical production rate that it seems almost impossible for it to meet its targets. And yet here it is raising more money to fund what’s going to be a massive capital spend in the first half of the year to prepare for that production run that’s scheduled to begin in July. In the first half of last year, the company spent around half a billion dollars on capex, and it plans to spend $2-2.5 billion in the first half of 2017, which gives some sense of just how big the leap is from anything the company has done in the past. That’s going to cause a massive cash drain, hence the new funding. Musk continues to execute extremely well on his long-term plans eventually, but hitting short-term targets continues to be his big weakness, and it feels like the Model 3 is either going to be the worst example of that flaw or the biggest possible exception to the pattern. I’m betting it’s the former.
California DMV: Humans soon no longer required in self-driving cars – San Francisco Chronicle (Mar 10, 2017)
Michigan’s autonomous driving laws already allow testing of cars without drivers, and given that these two states are home to much of the testing going on, California clearly feels it needs to keep up. Those Michigan laws assume that carmakers are going to comply with all applicable regulations, and therefore require that any testing is done by or in partnership with those carmakers, while the proposed California law has no such restrictions (logical given the biggest local testers are tech companies and now legacy automakers). In both cases, the states are deferring somewhat to the National Highway Traffic Safety Administration to set the overall rules and to some extent approve cars for autonomous driving without a driver. This Chronicle piece quotes a spokesperson from Consumer Watchdog, which has been particularly harsh (perhaps deservedly so) on Uber/Otto, but also seems to be one of the main organizations demanding tougher regulation of autonomous driving in general in California. What’s interesting is that there are so few voices on the other side of this rapid push towards autonomous driving.
California and Michigan have to be the two states where the most testing of autonomous vehicle technology is being done, with the former home to most of the tech companies in the space and the latter the home of several legacy automakers. The FT is here citing data from the California DMV, which you can see in its raw form here. What’s fascinating is the mix of companies here, as I’ve said before – there are several traditional carmakers (VW, Mercedes, Nissan, BMW, Honda, Ford, and Subaru), several big names from the tech world (Waymo, Tesla, Uber, Baidu, Faraday Future, and Cruise [now part of GM]), and a variety of other smaller companies. But Waymo has by far the largest number of cars and miles driven (and most accidents). But the California DMV is certainly the source of some of the most interesting data on self-driving testing anywhere in the world right now.
via Financial Times
Pay-as-you-drive insurance isn’t a brand new concept – indeed, I remember a colleague writing a report on this about five years ago when I was at Ovum. The basic concept is that the insurance company finds a way to measure actual driving behavior and then offers lower rates to those drivers who drive most safely. There are a number of pilots and active programs underway already, and this Tesla program just takes it a step further by focusing on drivers who turn on the Autopilot feature. Outside of this program, Root measures actual driving behavior through an app, but with Autopilot-enabled Teslas, there’s apparently no such hurdle to overcome. That’s great validation for Tesla (especially given the recent worries over its latest software), and also for autonomous driving technology as a whole – a key argument made by essentially all of its proponents is that it will be safer than human drivers. I’ll be curious to see if this program eventually gets expanded to cover other ADAS systems (since Autopilot is technically ADAS rather than autonomous technology), and whether Root’s data backs up Tesla’s claims about safety over time.
Self-driving cars are watching us and recording our data whether or not we’re watching the road — Quartz (Mar 7, 2017)
This article is part good reporting, part opinion, and comes with a clear point of view (which I’d articulate as “carmakers are collecting too much data on us and our driving behavior with insufficient transparency and opt-outs”). But the reporting is well worth reading whether or not you agree with that point of view: the piece does a good job of spelling out all the data that’s being collected by various automakers old and new, and what it’s being used for. And indeed, this data is critical for developing both ADAS and autonomous driving systems, because it’s only by measuring real-world human driver behavior at massive scale that cars can be taught both how to drive like human beings (which is important for trust and comfort) and how to drive better than human beings (which is important for safety). The legacy carmakers obviously have a big advantage here because they have many more cars on the road and hitting the road each year than newcomers like Tesla, let alone non-carmakers like Uber and Google. But it’s how that data is collected and used that makes all the difference here – putting advanced sensors in cars is critical to getting the rich data needed, but it also raises big privacy concerns which I suspect we’re going to hear a lot more about in the coming years.
It’s impossible to imagine any major car manufacturer putting out an ADAS system or autonomous driving technology that was as unready (and as apparently unsafe) as Tesla’s Autopilot software currently appears to be – it would be catastrophic for their brands and reputations. That’s probably the single biggest difference between Tesla and the major legacy automakers at this point, and it’s simultaneously what allows Tesla to move so much faster and what may end up causing major image, safety, and regulatory problems for the company as well. Moving fast and breaking things may be a fine motto for a social network, but it’s clearly not the right approach for a car. The very fact that the current feature set is said to be in beta feels like completely the wrong model for this environment. Tesla seems to be being helped by the fact that many of its drivers are early adopter types and eager to test even technology that isn’t completely ready, but I’m guessing they will feel differently if they or family members are hurt or killed in an accident because of this faulty steering and other erratic behavior. Tesla really ought to pull these updates and roll cars back to previous versions until it fixes the problems.
Toyota’s approach to autonomous driving strikes me as exactly the right one – as this article briefly explains, it’s approaching the problem from two different perspectives, one of which is about improving existing ADAS systems within the cars we’re driving today and in the near future, with the other being focused on Level 4 and 5 autonomy. I continue to be very skeptical that any car company is going to work its way incrementally and smoothly through the levels from 2 to 3 to 4, and believe much more strongly that we’re going to see a Big Bang shift from Level 2 to Level 4, which means that transition is likely to take quite some time. That doesn’t mean things like cruise control, self parking and so on aren’t going to get a lot smarter in the meantime, and that’s a good thing, but it does mean that true autonomy is both a long way away and likely to arrive all at once rather than incrementally. And of course because companies like Toyota have tens of millions of cars on the road already, they’re able to capture lots of data that will help with both the incremental ADAS and eventually autonomous technologies.
via The Verge
I’ve argued that the big car companies are actually participating pretty actively in the three big shifts occurring in their industry at this point, rather than just sitting idly by, and GM’s Maven business is a good example of some of that engagement, albeit on a fairly small scale. This new model doesn’t seem all that compelling – at over $1000 per month (including insurance, gas, and parking) it’s a little steep for a month’s Volt rental, which would cost you a fraction of that on a longer-term basis. But at least the company is experimenting. Other Maven services are a lot more interesting, and I had an interesting conversation with some of the team at the Detroit Auto Show in January. Maven Home is designed for high-end apartment complexes, for example, where owners get access to cars on an on-demand basis through their building, and GM is also doing interesting things with both Uber and Lyft separately.
This is an interesting but not altogether unexpected step. There’s an analogy here to Amazon’s discounted Echo-only music service, which takes advantage of the same limitations to offer a lower price for something that would normally cost more. GM is now offering $20 for unlimited data, which is the same as it used to charge for 2GB of in-car WiFi data. AT&T continues to sell in-car connectivity to carmakers at a rapid rate – about a million subs per quarter – but these subs are mostly extremely basic at the outset, covering just in-car telematics for a few dollars a month. Only if subscribers actually start buying the additional features such as OnStar and this kind of in-car WiFi does AT&T start to generate a more meaningful revenue per user, so being more aggressive about the pricing, especially as AT&T reintroduces unlimited plans for its own services, makes a lot of sense. And of course since GM gets a cut, it’s strongly incentivized to sell these services too.
This piece is a good reminder of three things: not all testing of autonomous vehicles is being done in California (or even the US), not all testing is being done by tech companies and startups, and countries, states, and cities are competing to be friendly to this testing. Old established carmakers are a long way down this road too – something that was borne out to me by conversations I had with a lot of them at the Detroit Auto Show in January – and they’re testing in their home markets as well as others. And cities like London are competing to be attractive to this testing, because it brings economic activity as well as a reputation for being friendly to technology in general. I learned to drive in central London, and wouldn’t really wish that on anyone, human or machine, but it sounds like the testing is mostly taking place in some of the less busy parts of the city, which makes a lot of sense.