BMW, Mobileye and Intel gave the most insightful discussion to date on autonomous driving and the major issues facing the industry. The biggest takeaways that investors should be aware of are:
- Mobileye Chairman & CTO Amnon Shashua stated that he has no target for vehicle fatalities. The number of deaths in the U.S. according to the NHTSA was about 35,000 in 2015. However 10,000 deaths was implied to be not good enough. Shashua stated humans will not accept computers killing drivers to any material extent. This was a dig at Tesla’s goal of decreasing the number of vehicle deaths. Giving it a second thought, Shashua is likely right in a similar way passenger plane deaths receive media scrutiny. The conclusion is that over time, Tesla will not be able to decrease vehicle deaths to the extent the public will be happy with, which we talk about later. However in the short-term, we see Tesla’s highly autonomous driving (level 3) vehicle updates likely reach anxious Tesla owners to positive reviews. Innovation is viewed positively by Tesla shareholders as we have seen from past announcements. Mobileye’s level 3 solution will only be in the Audi A8 (about 5,000 U.S. vehicle sales) at an added price. The hype from Tesla’s updated Autopilot we believe will help Tesla raise the billions they need in 2017/2018 to keep their Balance sheet in good order with any material cost overruns in their gigafactory and higher production for their Model 3.
- The key to virtually no vehicle deaths for Mobileye is sensor and mapping redundancy. An object needs to be seen with a camera, radar and LiDAR. A pop can at night may not be seen by cameras or may be distorted by radar, but might be picked up properly by LiDAR. Precise mapping is also needed for another layer of redundancy to reach strict safety levels of well under 10,000 a year in the U.S. However, given that Mobileye is not targeting a specific vehicle death level, there remains a small chance their redundancies will not be acceptable enough to a large portion of the public if each vehicle death is hyped by the media. It appears to us that this will manifest itself in a lower stock price when the first vehicle deaths take place for both Mobileye and Tesla. The possibility starts with the Audi A8 later this year and with Tesla eyes off the road potentially later this year. Expect Tesla to raise money prior to any accident (rather than prior to an announcement like their last raise).
- Artificial Intelligence in the car is the primary reason why Silicon Valley (Google and Apple in particular) is so anxious to enter the autonomous driving market according to Shashua. Going to a restaurant and having your car suggest where to go and then proceed to drive you there is worth something to these heavyweights.
- Brian Krzanich, CEO of Intel – “We are far enough along now that we understand the problem set, now it’s a question on execution and time. From an engineering standpoint we know what we need to do. I’m optimistic, ahhh errrr in fact sure that four years from now these cars will be on the road.”
- BMW Group board member of Research and Development Klaus Fröhlich – “Autonomous driving will change the architecture of the car…we need to be very careful how much data we send via the 5G network...We need a 5G network…We need to partition what happens in the cloud and what happens in the car” He was likely referring to full level 4/5 autonomous driving solutions. While discussed a few years ago, this is material now that its partnership with Mobileye is well underway. This will give Tesla an even larger headstart as they do not appear to need 5G for their version of autonomous driving and they can make a reasonable argument in the interim that their solution is comparable to Mobileye’s level 3 solution in the Audi.
