Apple – Baby driver.

Drive.ai adds nothing to Apple’s proposition.

• Apple certainly needs to make an autonomous driving acquisition, but whether drive.ai is the right asset and the logic of pursuing autonomous driving at all remains very much open to question.
• The Information (see here) has gotten wind that Apple is looking to acquire drive.ai, most probably as an acquihire.
• This means that Apple would hire all of the people and probably take possession of the intellectual property but leave the company itself behind.
• This strongly implies that drive.ai has gotten itself into trouble most likely as a result of running out of money and not being able to raise any more.
• This comes as no surprise as the autonomous driving space is already very crowded with 30 players testing in California alone.
• Furthermore, it turns out that autonomous driving is proving to be much more difficult than anyone expected resulting in a large pullback of expectations of commerciality at the end of 2018.
• With a few notable exceptions, gone are the days of 2020 or 2021 launches which have been replaced with “we hope to have vehicles on the road within 10 years”
• Against this backdrop, drive.ai is an also-ran with mediocre performance meaning that there many more deserving places for an investor to put his money.
• This explains why it is having difficulty raising money and has been trying to sell itself since February.
• Apple is also not faring very well as, despite having a lot of vehicles, RFM ranks it 29^th out of 30 of the companies that test in California (see here) with its solution being some 9,787x worse than Waymo’s.
• In 2018, Apple reported 1.1 disengagements for every mile driven and was only prevented from winning the wooden spoon by Uber.
• This is what led me to predict that Apple would need to acquire in order to improve (hence drive.ai) but I am not convinced that drive.ai will solve its problems or do anything for the company or its owners.
• This is because drive.ai is not a leader in autonomous driving ranking 12^th out of 30 on RFM’s ranking, being some 132x worse than Waymo.
• However, it is much better than Apple’s offering, meaning that acquisition will make sense if Apple is serious about autonomous driving.
• This brings us to the other issue with Apple working on autonomous driving which is why it is doing it in the first place.
• Apple has said that autonomous driving is the mother of all AI problems but solving this problem smacks of engineering pride rather than making good investment decisions.
• Apple has no obvious route to market with an autonomous driving solution and being good at enabling cars to drive by themselves is not going to boost the sales of iPhones, iPads or Macs.
• It is also not going to boost sales of the services business which Apple is working hard on growing at the moment.
• Furthermore, any AI expertise that it gains as a result of an acquisition or working on a solution is very unlikely to be transferrable to the rest of the business.
• Hence, I find it very difficult to even make the case that it should work on this problem in order to obtain skills that can then be profitably employed elsewhere.
• This is why I continue to think that its dreadful performance in 2018 is a sign that it should not continue in this area and close up shop and focus on using car infotainment to boost loyalty to the products and ecosystem that it does sell.
• For drive.ai, this is a stay of execution although I suspect it is one that may prove temporary.