Self-driving cars face detour from tech company funding
SAN FRANCISCO — Tech companies once promised that fully functional, self-driving cars would be on the road by 2020 and on the path to remaking transportation and transforming the economy.
But a decade after Google unveiled an autonomous car prototype with global fanfare, the technology is still far from ready, and many investors are wary of dumping more money into it — just when the world could benefit from cars that ferry people and deliver packages without a human driver.
The companies that made these promises are in a jam: To perfect their technology, they need to test it on roads. But they need at least two people in the cars to avoid accidents. Because of social distancing rules meant to keep people safe during the coronavirus pandemic, that is often not possible. So many cars are sitting in lots.
“This is a difficult time for everyone,” said Bryan Salesky, chief executive of the startup Argo AI, which is backed by $1 billion from Ford and $1 billion in promised funding from Volkswagen. “We want to get back on the road as soon as it is safe to do so. There is no substitute for on-road testing.”
The timeout caused by the pandemic has hastened an industry shakeout that was already happening. Many self-driving car companies have no revenue, and the operating costs are unusually high. Autonomous vehicle startups spend $1.6 million a month on average — four times the rate at financial tech or health care companies, according to PitchBook, which tracks financial activity across the industry.
It’s a sharp turn from 2016, when an investment bubble in self-driving technology started. General Motors acquired Cruise, a 3-year-old, 40-person startup, for roughly $1 billion including performance incentives.
A few months later, Uber announced that it would pay around $680 million for Otto, a 6month-old autonomous trucking startup.
The price tags for those deals worked out to about $10 million per engineer, and that became the going rate.
Now one self-driving car startup has gone out of business, and another is for sale. Four have laid off employees. And bigger companies are hunkering down to wait out the delays.
Cruise said that although it had gotten some cars back on the road by making deliveries for two food banks in San Francisco, its testing had been curtailed. Last week, Ford, which has temporarily closed factories because of the virus, pushed the launch of its autonomous service to 2022.
At Waymo, the self-driving car unit of Google’s parent company, Alphabet, the pandemic has set work back at least two months because of social distancing rules and trouble getting hardware from other countries, John Krafcik, the company’s chief executive, said Monday.
Waymo said on Tuesday that it had raised $750 million in funding, adding to the $2.25 billion it secured at the beginning of March.
The startup Zoox, which investors have valued at $2.7 billion, recently hired the investment bank Qatalyst Partners to explore a potential sale while it also tries to raise new funding, according to two people familiar with the effort, who were not allowed to speak about it on the record. The news was reported earlier by The Information.
There have been layoffs at Zoox, at the autonomous trucking companies Ike and Kodiak Robotics, and at Velodyne Lidar, which makes the sensors that are an essential part of most autonomous driving. Lyft, which recently laid off or furloughed more than 1,000 employees, said its autonomous division was affected.
“It was appropriate and necessary to be conservative about our cash burn,” said Alden Woodrow, Ike’s chief executive. “That had to happen.”