(The Big Disrupt) Why Google may end up selling Waymo (position rating C-)

Driverless cars have long been promised to be future of how we all get from A to B and no company in the last decade has positioned itself to make good on these promises than Google/Alphabet but a closer look at the company’s self-driving car outfit Waymo and the potential market for level 4 and/or 5 autonomous vehicles suggest Google may cut its losses and start looking for buyers.  

There are a number of reasons why Google may end up selling Waymo but (some of them we’ve covered in the past) but a key reason why Google may end up selling Waymo is quite simple: Google is not a car company. 

We like everybody else a decade ago were caught up in the prospect of self-driving cars revolutionizing how we travel but upon reflection, our initial excitement was tempered as we looked at the huge technical and economic challenges players in the autonomous vehicles space face, challenges that would  test Google’s commitment to bring self-driving cars to market.  

Whether it’s the technical challenge teaching AI enabled cars to negotiate human drivers in dynamic environments or the thin margin of error (mistakes can and have led to injury or death) self-driving cars seemed doomed to development hell outside of the odd test case that keep the technology relevant. However, the most troubling issue that plague the nascent self-driving car industry is the dwindling business case.

Even back in the early to mid 10’s when hopes for self-driving cars where high, the business of self-driving cars didn’t make much sense. Sure, there was a proliferation of potential use cases but the actual business case didn’t make sense because of one simple reason, self-driving cars, in our opinion, has a limited business case because it’s a glorified infrastructure project. self-driving cars have little in the way of product market fit and is only viable when autonomous cars are produced to the point that they become ubiquitous. 

There’s no way Google are going to commit the capital it would take to make this possible and Google know it as it recently for the first time opened Waymo to outside investment and our opinion, won’t be the last. In our opinion, the only way Google doesn’t sell Waymo outright is that come to its senses and commercializes the only thing valuable about Waymo, the technology itself. 

Google is one of greatest companies in history but it’s increasingly looking desperate to find a second pitch as its search ad business is coming under pressure from other players (Amazon and Bytedance) and is now waking up to the face that it can’t shoot for the moon forever while powerful players are slowly but surely bringing it back to earth.  

In sum, While Google will fight hard and do everything to bring driverless cars to market but ultimately the financial and operational commitments the Mountain View based company would have to make will force Google to sell Waymo and focus its efforts elsewhere.  

(The Big Disrupt) driverless cars: Why Google's Lawsuit against Uber is a brilliantly cynical move

In what has been a terrible February for the Uber, sometime ally and enemy Google decided to pile on to a Uber's self inflicted woe by filing a civil lawsuit against the company accusing them of stealing key aspects of their self driving car tech . 

Google's self driving spinoff Waymo accuses former employee Anthony Lewandowski of stealing 14,000 files on its LiDAR designs which allows its cars to use lasers to navigate the physical world and using the stolen files to form a startup called Otto which was acquired by Uber last August . 

The civil lawsuit marks a new low in Google's relationship with Uber which has  been strained since reports leaked two years ago that Google was planning to launch its own rideshare service with a driverless fleet, a move that would see Google compete with Uber directly.  

Since then, Uber have been very proactive about developing its own fleet of driverless cars which would significantly cut down their costs which have so far seen the company burn through cash at an unprecedented rate. Uber have made a lot of progress in the last two years largely through famously raiding Carnegie Mellon's much respected robotics department for talent, securing key partnerships  with automakers such as  Toyota who outstrip Google in driverless car patents and smart acquisitions but they still lag behind Google who have been pioneers in the space, particularly LiDAR technology.    

One of the major costs hampering the development of driverless cars for the mass market is the prohibitive cost of LiDAR technology which encouraged Google to develop its own LiDAR to lower costs which have declined steeply since google forked out a whopping $75,000 per unit 8 years ago. Google itself has managed to cut Lidar costs by a whopping 90% but leading Lidar maker Velodyne plans to cut the price of lidar sensors even further to a mere $50 per sensor. What this all means is with cheaper lidar sensors, Google can provide a cheaper driverless car to mass market. 

This is bad news for Uber and other players in the race to bring driverless cars to market as while the price for lidar sensors have plunged, Google is the only player to come up with it's own in house solution which gives them a major competitive advantage. The only reason Uber brought Otto just three months after it was formed was to develop its own in house solution and hire Lewandowski to lead the effort but just six months later, Uber are almost certainly going to pay dearly for their $680 million acquisition regardless of what happens going forward. 

In sum, Google and Uber have been on a collision course two years and with Waymo willing to drag Uber's name through the mud in what may be one of the nastiest trade secret battles ever, expect more of the same as the two former allies lock horns.