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Steven Grant
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Process management consultant for start-up companies. Focused on establishing standardized operational processes and management disciplines to support rapidly growing small companies.
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  • Strategic Investing Themes: Autonomous Computing For Driver-Assisted Cars  0 comments
    Feb 11, 2013 11:03 PM | about stocks: GOOG, VLEEY

    As noted in our earlier article, autonomous computing is a long term investing trend which will fundamentally change almost everything, nonetheless the question remains: Is there profit in this trend for the home investor? In a previous article the broad landscape of autonomous computing as it may impact various sectors was considered. In this follow-up article the application of autonomous computing for driver-assisted cars will be reviewed. Subsequent articles will continue peering down this ever-widening rabbit hole to identify participants from other industry categories where autonomous computing and autonomous tools are already widely deployed.

    First, a quick definitional review: autonomous computing encompasses a continuum of programmable tools which mimic and enhance human abilities to solve complex problems. Think of computers killing at Jeopardy, assisting in medical diagnoses, flying drones into war zones, and targeting ever more annoying ads at already annoyed online shoppers. The autonomous computing trend percolated over the past 10-20 years and will rapidly evolve over the next ten+ years until it becomes pervasive in everything from surgical instruments to excavators. Today's simple industrial robots will mature rapidly, drop their spot welders, and grab a seat in front of every imaginable complex problem solving and pattern recognition task.

    Numerous programs are underway in the automotive industry and nearly all transportation sectors will benefit from this technology. Google's (NASDAQ:GOOG) driverless-car is one of the most visible efforts, but there are R&D initiatives, prototypes and production implementations across a broad spectrum of manufacturers and designers.

    Despite impressive progress to date, it is difficult to understand the strategic rationale for Google's involvement from an investment perspective. Autonomous vehicles are an emerging multi-trillion dollar global business opportunity, but not an intuitively perfect match for Google's core competencies. The effort seems unlikely to increase Google's long term market value. In addition, there is tremendous competition from companies with greater domain expertise and more natural marketing channels: Ford, General Motors, Continental, BMW, Volkswagen, Audi, Saab and many others all have strong interests and investments in driver-assisted and driverless technologies dating back a decade or more. Perhaps Google is involved in this effort simply to accrue patents which can be used as trading currency in future negotiations with other industrial giants. Google could as easily, and with no less justification, get involved in drug development, chip manufacturing, advertising, operating systems, or mobile computing platforms-all big ideas requiring deep pockets and large quantities of smart people (okay, I still don't get Google's strategy with operating systems and mobile platforms either).

    Google essentially sells programmable structures today, which are one of the highest margin products because you're essentially selling an idea wrapped in a very small capital investment, much like pharma, which sells intellectual property, or Coke, which sells a syrup recipe, and ratings agencies, which sell imprimaturs-much like the church used to sell indulgences.

    As reported by the Detroit News, the head of Google's driverless car initiative confirmed their lack of interest in manufacturing cars. Anthony Levandowski stated: "We don't want to make cars. That's not our interest. All options are open. From giving the technology away to licensing it to working with (suppliers), working with (automakers) building a car with them - everything is open - and we're trying to figure out which paths make the most sense."

    According to an IEEE summary of Google's technology presentation the Google car does not depend on GPS and it does not typically drive a route cold. Detailed digitized maps are used since GPS is not nearly accurate enough and Google engineers drive a route several times to note specific details before the autonomous car is turned loose.

    USA Today reported the technology required for Google's automated Prius adds $150,000 to the car's cost. However, the same article noted the price of the 3D laser vision system (LIDAR) was dropping rapidly. USA Today noted, "German supplier Ibeo will supply lidar systems for an undisclosed automaker in 2014 for about $250 per vehicle." Let's see, $150,000 or $250, who might win this round?

    According to Ibeo the LIDAR system is accurate within 1.5" at just over 200 yards--in any weather. I will spare you the technical description of how LIDAR can work as well as RADAR in rain and snow; suffice it to say this is a useful breakthrough. Built into the system are automatic identification algorithms which can track up to 128 objects simultaneously and classify them as cars, bikes, pedestrians, etc. This allows manufacturers and system integrators to greatly reduce their programming time and bypass some thorny technical issues.

    Ibeo, a very small private company, and Valeo (OTCPK:VLEEY), a $4B market cap auto industry supplier, established a working agreement to jointly develop autonomous systems for the automobile industry. Valeo makes self-parking systems, exterior vision cameras, automated start-stop ignitions, lane change assistants, and automated wiper controls.

    One major reason the technology will come down in cost rapidly is because the technology can be installed and used incrementally by car manufacturers. Consider the following list of technology applications from Ibeo:

    • Autonomous Driving
    • Terrain Mapping
    • Object Tracking
    • Adaptive Cruise Control
    • Blind Spot Monitoring
    • Lane Keeping Assist
    • Traffic Sign Recognition
    • Pedestrian Detection
    • Automatic Emergency Braking
    • Collision Avoidance
    • Power Line Mapping
    • Wireless E-Stop
    • Lane Departure Warning
    • Forward Collision Warning
    • Pre-Crash Collision Mitigation
    • Headlight Control

    Many of these capabilities can be implemented, tested, and refined for simple, but productive applications, way in advance of installing or activating the refinements needed for fully autonomous vehicles. Collision avoidance, blind spot monitoring, lane keeping, headlight control, collision detection, self-parking, automatic braking, adaptive cruise control, and traffic sign recognition are all currently in, or announced, for production vehicles, many using the Ibeo or Valeo technologies. Not test vehicles or limited edition prototypes, but full production vehicles with option packages available to consumers. This incremental approach to the technology allows manufacturers to evaluate market acceptance of various features and build toward autonomous vehicles without requiring exorbitant all-or-nothing R&D expenditures. As the market will be driving acceptance and investment, it will move extremely rapidly-and without changes required in global highway infrastructure or design. Eventually infrastructure enhancements will come naturally, for example: sensors on Do Not Enter signs could automatically warn, or stop, a driver motoring up the off ramp rather than depending on sign recognition technology. At some point all vehicles will have communication protocols continuously making surrounding cars aware of their presence without the need for elaborate vision systems.

    Ultimately consumers will drive the pace of change for autonomous vehicles. Because of the pervasive usage of this technology throughout the military the basic R&D is largely complete. At the world congress for intelligent transport systems in Vienna there were over 600 exhibitors. The technology is already out there, simply waiting for the suppliers to adjust their pricing to a vastly bigger market and for the automobile manufacturers to undertake the last integration steps and recognize the marketing potential.

    Any parent who can afford a car for their teenager will break down the showroom doors to get a car which might help their child avoid a life-changing or life-threatening accident. Once this technology is understood it will be de rigueur with or without Federal or State mandates. Insurance rates will drop steadily as the technology proves itself and safe driver discounts will become much larger safe car discounts. Unlike a seat belt, which can be defeated any number of ways; a collision avoidance system will always be smarter than the dumb driver in front of you on the highway swerving into your lane.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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