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Self-driving car companies’ first step to making money isn’t robotaxis

Self-driving car companies’ first step to making money isn’t robotaxis

While governments may be cautious of self-driving cars, consumers and businesses alike are eager to purchase the technology.

It’s a market for a limited version of self-driving technology that helps drivers with duties such as parking and changing lanes on the highway. According to McKinsey, the market for a rudimentary kind of self-driving technology — defined as “Level 2” in an autonomous driving classification system — is worth 40 billion yuan ($6 billion) in China alone.

“L2, boosting the safety value for consumers, its commercial worth is extremely evident,” Bill Peng, a McKinsey partner based in Hong Kong, told Dailion on Monday in Mandarin. “Robotaxis is definitely a path, but it hasn’t [yet] resulted in commercialization.”

In China, robotaxi companies have made significant progress in recent months, with Baidu and Pony.ai being the first to receive approval to charge fares in a Beijing neighborhood and other parts of the country. The public is eager; Baidu’s robotaxi service Apollo Go claims to have logged over 2,000 journeys each day.

However, robotaxi applications demonstrate that corporations are still massively subsidizing journeys when it comes to revenue. For the time being, the money for self-driving technology is coming from software sales.

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Profitable technology

Lucrative tech

Goldman Sachs and Nomura investment analysts see prospects in auto software, from in-car entertainment to self-driving systems.

WeRide, a Chinese self-driving tech startup, announced last week that it had obtained strategic investment from Bosch, a German engineering firm, to develop an assisted driving software system.

According to Tony Han, WeRide’s founder and CEO, the goal is to jointly build an L2/L3 system for mass manufacture and delivery next year. Under some conditions, L4 signifies fully self-driving capability.

“Of course, as a collaborator, we want this sold [in] as many automobile OEMs in China as possible so that we can maximize our [income and] profit,” he said, referring to automakers. “We are convinced that L2 and L3 technology can help individuals drive cars [safely].”

Bosch termed the arrangement a “strategic relationship” in a separate statement, saying its China company will provide sensors, computer platforms, algorithm applications, and cloud services, while WeRide would provide the software. Neither corporation disclosed the amount of money invested.

Tu Le, founder of Beijing-based advice firm Sino Auto Insights, described the deal as “extremely significant.” “This isn’t just a venture capital firm that sees opportunity in the general market and invests in it.”

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The next step in commercialization, he believes, will be to get more of WeRide’s technology “bolted on the partner OEM’s products in order to get more pilots launched in China and experimenting with paid services so that they can tweak business models and better understand pricing dynamics and customer needs.”

According to CB Insights, WeRide is valued at $4.4 billion, with Nissan and Qiming Venture Partners as investors. WeRide is testing self-driving street sweepers in portions of Guangzhou, where it already operates robotaxis and robot buses.

CEO Han was adamant about not discussing particular valuation figures. He stated that his biggest issue, rather than needing for additional funding, was how to reorganize the start engineers. up’s

“Because Bosch is in charge of integration, we must devote 120 percent of our time to assisting Bosch with integration and adaption work,” Han explained. WeRide hasn’t gone public yet.

China’s stock market game

Goldman’s autonomous driving theme recommendations for publicly traded Chinese auto software businesses include

The China stock play

ArcSoft and Desay SV are two publicly traded Chinese car software businesses that Goldman recommends for autonomous driving.

According to the experts, China’s outsourcing business model provides independent software vendors with greater options than in the United States, where software is built in-house at companies like Tesla. By 2025, Beijing hopes to have L3 vehicles in mass production.

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“Auto OEMs are investing aggressively in-car software/digitalization until 2025,” the Goldman analysts wrote in mid-March, “seeking US$20 billion or more in achievable software income by decade’s end.”

They estimate that by 2030, the value of software in each automobile will have increased from $202 for L0 cars to $4,957 for L4 cars. In today’s market, the battery component costs at least $5,000. The market for advanced driver assistance systems and autonomous driving software is expected to grow from $2.4 billion in 2021 to $70 billion in 2030, according to the experts, with China accounting for almost a third of the industry.

General Motors said in September that it would spend $300 million on Chinese self-driving technology start-up Momenta to develop autonomous driving for GM vehicles in China.

In a statement, Julian Blissett, executive vice president of General Motors and president of GM China, said, “Customers in China are embracing electrification and advanced self-driving technology quicker than anyplace else in the world.”

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