Autonomous driving – The FOMO signal

When FOMO bails, it is time to consider buying.

• Ford’s signalling of its intention to exit autonomous driving marks a point of capitulation for the momentum tourists implying that only the serious players are left and that perhaps the time is ripe to buy the distressed assets.
• Ford has informed the NHTSA (US road safety regulator) that it is not planning on moving ahead with level 4 autonomy but will stick to levels 2 and 3.
• Level 4 is where the occupant can be asleep or dead drunk in the back seat whereas levels 2 and 3 refer to driver assistance but where human oversight from the occupant is needed at all times.
• These technologies are far easier to implement because the human is there to correct the system when it goes wrong meaning that they can be realistically implemented now.
• However, practical implementations of level 3 are pretty scarce with only Mercedes achieving certification for level 3 and only for speeds of up to 40mph where the driver must still be ready to take over at any time.
• This is a feature designed for making sitting in traffic much easier to bear and those that have tried it, love it.
• Ford entered the autonomous race in 2017 announcing that it would invest $1bn in Argo AI which was then followed by another $1bn from VW in 2021 when Argo began to run into trouble.
• Barely 18 months after VW invested, Argo was closed down and the employees were split between Ford and VW.
• VW is still pressing ahead with autonomous driving and intends to create a version of its ID.Buzz which it hopes to sell as a robotaxi.
• Going for commercial vehicles first is probably wise as it is much easier to rigidly geofence commercial vehicles and geofencing in turn makes the task of creating a reliable self-driving solution easier.
• This is because geofencing makes the driving dataset finite which alongside stability are the criteria of a dataset that RFM Research has identified as being needed to have deep learning systems that work really well.
• Geofencing also helps reduce volatility but it cannot do so in its entirety and so there is still work to be done before these vehicles get on the road in a reliable way.
• Despite this, the autonomous driving industry is in dire condition first being hammered by its failure to meet the unrealistic expectations that it set and then secondly by the fall in technology valuation and the weak macro outlook.
• Consequently, sentiment is rock bottom and all of the tourists and those who should never have been there in the first place (the FOMO participants) have left or are in the process of leaving.
• Fear, uncertainty and doubt (FUD) are in the driving seat of this sector.
• Hence, autonomous driving is currently starved of capital meaning that new dollars will buy many times more assets than they did 5 years ago.
• Furthermore, as the momentum tourists and non-tech savvy companies continue to give up, this is the signal of the bottom in terms of valuation.
• I believe that in the long-term the problem can be solved and that we may start to see the beginnings of real autonomy around the 2028-time frame and once it goes commercial it will rapidly become the hottest new technology.
• By that time, I suspect that there will be a number of 3^rd party offerings that are all good enough meaning that there is little reason for the OEMs to invest in autonomous driving themselves as the likes of Ford have found out.
• Hence, if one can find a company with enough cash to survive, a decent technological offering and management capable of executing, there is a case to be made that the nadir of its fortunes is at hand or at least very close.
• There is plenty of time to conduct that hunt but the hunt can begin now.