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Driverless Car Rollout Will Take Years and Billions of Dollars

December 2, 2020 By Jeremy Jones, CFA

By Olivier Le Moal @ Shutterstock.com

The Wall Street Journal’s Stephen Wilmot explains the time and capital it will take to make driverless cars a reality. He writes:

Driverless cars are moving out of science fiction and onto U.S. roads. But this is just the start of a long journey before they fulfill their transformative potential.

Signs of very early-stage commercialization are emerging from the corporate science projects that want to remove human drivers from vehicles. Alphabet’s Waymo seems furthest ahead with its “robotaxi” project in the suburbs of Phoenix. Customers used to have to sign a nondisclosure agreement to hail a ride with no backup driver, but Waymo opened the service up in October.

Others aren’t far behind. Motional, a $4 billion joint venture between South Korean car giant Hyundai and automotive supplier Aptiv, said last month that it will take safety drivers out of its test vehicles in Nevada “in the coming months.” Cruise Automation, the driverless-car business controlled by General Motors, GM -1.04% has said it would remove backup drivers from its test cars in California by the year-end.

Doing without safety drivers is an important milestone, but there are plenty more. Once companies have worked out how to operate robotaxis safely in one urban district in good weather, they will need to adapt to new areas and a wider range of conditions. Eventually, this kind of gradual expansion should give driverless cars the scale necessary to drive down costs and compete with human-driven taxis, public transport and, in the very long run, car ownership.

Such lofty end goals hint at the huge business opportunities and threats that have drawn tech giants, the auto industry and “mobility” providers such as Uber all into the race. For a technology that needs the highest safety standards to secure regulatory and public support, though, the rollout will take years, all the while consuming billions of dollars in capital.

Karl Iagnemma, chief executive of Motional, pegs the price of an entry ticket into the driverless-car contest at roughly $1 billion. That buys the necessary teams, components development and a test fleet, among other startup costs. Much more will be needed to roll out customer-ready fleets on a commercial scale.

Read more here.

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Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #10 in CNBC's 2019 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
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