When Will Self-Driving Cars Be Mainstream? Thanks to COVID-19, It Could Be a While

June 8, 2020 - 8 minutes read

A decade ago, tech companies promised consumers that fully-functional, self-driving autonomous cars would be on the road by 2020. The promise included a revolution of transportation as we know it. It’s safe to say we were all hyped about this news.

But that promise has remained largely unfulfilled due to several major issues: it’s very expensive to develop the artificial intelligence (AI) and continuously test it; pedestrians have been killed during testing; and COVID-19’s social distancing rules have delayed further optimization and testing.

A Traffic Jam for Testing Self-Driving Tech

Social distancing from the coronavirus has created an obstacle for companies who need to test their self-driving technology. Since two people are needed in the car to avoid accidents, it’s been extremely difficult to maintain COVID-19 rules while continuing business as usual. As a result, autonomous cars are sitting in lots, waiting for a chance to start up testing again.

Bryan Salesky is the chief executive of Argo AI. Argo AI’s investors include Ford at $1 billion and Volkswagen at a promised $1 billion. Salesky says that all of the autonomous car companies are itching to get back on the road because there is no replacement for on-road testing.

But the truth of is that the industry was already facing a lot of backlash before the pandemic reached us. Because it’s still an emerging technology, many autonomous car companies have little to no revenue due to dumping all funds in research and development. In fact, a study by PitchBook showed that self-driving car startups spend $1.6 million per month on average. That’s four times the amount that health technology and financial technology companies spend.

It’s also a stark difference from 2016, when companies and venture capitalists were investing heavily in the technology. General Motors acquired Cruise, a startup of 40 people with three years under its belt, for almost $1 billion. Months later, Uber, a perpetually in-debt company, acquired Otto, a six-month-old self-driving truck startup, for $680 million.

The effect these acquisitions had on the market was measurable; these deals gave about $10 million for each engineer, which became the default going rate for startups when they valued themselves.

Unsustainable Budgets = Unsustainable Business

Seeing an autonomous car company go out of business is no longer strange. It’s slowly becoming the norm. For bigger companies that acquired self-driving car startups, the plan is to hunker down and wait for the storm to pass.

Cruise was able to get some cars on the road during the pandemic to deliver food and supplies to two San Francisco food banks, but its testing hasn’t reached further than that. Ford recently pushed back the launch of its autonomous cars back from 2021 to 2022.

Waymo, Alphabet’s self-driving car division, has been set back at least two months due to the pandemic. The company┬ájust received a large investment of $2.25 billion at the beginning of March 2020, and it just added another $750 million in funding to its budget.

Even with these high budgets, tracking down materials and hardware from other countries has also been a major problem. Oliver Cameron, the chief executive of Voyage, said that hardware supply chains in China were at a standstill, and that his company’s $52 million funding would only last until the end of 2021 at this rate.

But the biggest problem? Layoffs are rampant in the industry, with Zoox, Ike, Kodiak Robotics, and Velodyne Lidar all furloughing employees. Lyft also recently laid off more than 1,000 employees, stating that its autonomous driving division was heavily impacted by the pandemic.

Alden Woodrow, Ike’s chief executive, simply said the layoffs were necessary to conserve cash.

Problems Pre-COVID

COVID-19 isn’t the only problem plaguing the autonomous car companies. In March 2018, an Uber autonomous car killed a pedestrian in Tempe. After the news came to light that only one technician was inside the Uber car, the self-driving car companies made an informal rule to have at least two people in their test cars at any given time.

Cameron said that was the exact moment when the industry went from being a “bull market to a bear market.” He added, however, that the pandemic has further pushed the market into decline.

For many consumers, the real-life consequences of this new technology hit hard. It was obvious that it was not ready to be released into the public anytime soon. Further, the cars were making unexpected mistakes. It turns out that teaching cars about safety is more difficult than previously imagined.

Waymo continued to operate test cars in Phoenix, but the car required safety personnel to stay in the driver’s seat.

Fighting for an Autonomous Future

It’s clear that in the coming months, the better-funded and larger companies will be able to stay afloat due to the money that was previously heavily invested. For example, Argo AI will be able to use the promised Volkswagen investment to carry them through these difficult times.

Starsky Robotics wasn’t one of the better-funded startups. As the pandemic hit in February, it had to shutter its doors. Although it attempted to sell its assets, potential buyers were not biting, according to the company’s chief executive.

And some autonomous car companies, like Drive.ai, which was sold to Apple, have slightly pivoted to use their technology in other places, like retail warehouse robots.

Although still bright, the future for self-driving car companies is looking a little dimmer. The cost of achieving the near-impossible is going to land many more organizations in the graveyard before consumers are able to climb into an autonomous car with full trust in the technology.

The road that lies ahead of autonomous vehicles is fraught with perils. And it’s making many investors wonder if hitting the brakes on these endeavors is best.

What do you think of the problems facing the self-driving car industry? Do you think this technology has hit a serious roadblock? Or do you believe it will pick up momentum as the pandemic passes? As always, let us know your thoughts in the comments below!

Tags: , , , , , , , , , , , , ,